RCC Engineering, a Kerry-based specialist in water and waste engineering, has become the largest case to emerge from the State’s new “examinership-light” restructuring process for small companies, which has seen Priority Construction in Dublin take a controlling stake for a €800,000 investment.
The restructuring saved more than 70 jobs as the company exited the so-called Small Company Administrative Rescue Process (Scarp) last month.
Scarp was introduced in December last year to help small firms to restructure through a combination of debt write-down and new investment and is significantly cheaper and less bureaucratic than a court-supervised examinership.
To date, some 14 companies have entered the Scarp process, according to information published in Iris Oifigiúil, the State’s official gazette. Only a handful have successfully exited this to date.
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RCC Engineering, which was set up in 2005 and has turnover of more than €10 million, entered Scarp in early August after falling into financial difficulty with €5.2 million of liabilities.
Brian McEnery, a partner and head of advisory with BDO Ireland, was appointed as a process advisory to oversee the restructuring. The deal hammered out involved family-run Priority Construction in Clontarf in Dublin investing €800,000, three-quarters of which was made up of equity, with the remainder comprised of a subordinated loan, he said.
Documents on the equity injection, identifying Priority Construction as the investor, were filed with the Companies Registration Office (CRO) in recent weeks.
A company controlled by RCC directors Liam Hickey and Michael Rogers also made a small investment as part of the restructuring, according to the documents.
The fresh money helped Mr McEnery strike a deal with creditors that will see so-called super preferential creditors, which relates to social insurance, and secured creditors, led by Bibby Financial, recover all of what is owed, he confirmed to The Irish Times.
Preferential creditors, including Revenue, will recoup 20 per cent of what they are owed, while unsecured creditors will receive 7.5 per cent, with the potential of a follow-on payment as the company pursues payments on certain contracts.
The plan received more than 90 per cent support from creditors last month, well in excess of the 60 per cent in number necessary to push through a Scarp restructuring. Law firm Mason Hayes & Curran also advised on the process.
Efforts to secure comment from Mr Hickey and Mr Rogers, as well as Eoghan McCarthy, managing director of Priority Construction, were unsuccessful.
“Scarp will not be suitable for all companies and where viability is not clear to see, then, unfortunately, liquidation will need to follow for such businesses. However, where viability is present, subject to new investment and creditor support, then we believe Scarp is a real restructuring option,” said Mr McEnery.
“We would, however, impress that time is of the essence and if your business is experiencing difficulties we recommend early engagement with an experienced insolvency practitioner.”
A widely predicted global surge in business collapses at the outset of the Covid-19 pandemic two years ago was averted by Government aid for companies and households during the worst of the crisis.
However, Irish corporate insolvencies rose about 33 per cent in the first three-quarters of this year to 378, according to Deloitte, as supports were phased out and businesses grappled with soaring inflation.
While the trend of companies going under remains below that seen in 2018 and 2019, before the pandemic, insolvencies are widely expected to continue to rise in the coming 12 months as households and business are squeezed by rising inflation and interest rates.
There were 767 corporate insolvencies in 2018 and 568 in 2019, according to Deloitte figures.
