Examiner for video chain with debts of Eur20m

CHARTBUSTERS, WHICH runs 37 home entertainment stores employing 267 workers, has gone into examinership.

Gary McCarthy, counsel for the company and six related firms including tanning and weight-loss outlets, told Mr Justice John Edwards in the High Court yesterday that Chartbusters had debts of about €20 million.

He said Bank of Scotland (Ireland), KBC Bank, Lombard Ireland and Friends First Finance Ltd., were owed €12 million with landlords being owed €2 million.

Judge Edwards appointed Neill Hughes, of Hughes Blake Chartered Accountants, interim examiner to protect the company's assets, examine the company's state of affairs, seek out potential investors and put in place a scheme of arrangement for for dealing with creditors.

Director Richard Murphy told the court that , in 1979, he founded XtraVision which built up a very extensive business renting and selling videos and associated products. He sold his shares in XtraVision to Cambridge Group in 1990 with a three-year non compete clause.

In July 1993, Chartbusters was incorporated, opening stores in Blanchardstown and the Square in Tallaght.

By 2002, the group had 50 stores grossing a profit of €11 million. Two years later profits had risen to €17.5 million.

As a result of competition and changes in technology generally, the company had diversified into internet services and tanning booths.

Today, as a result of belt tightening over the years, the company had 19 stores in Dublin and 18 throughout the rest of the State.

Mr Murphy said the projection for the future was the retention of about 20 stores that are currently operating profitably.

Group turnover had dropped to €12.2 million for the period to April 30th, 2008, and costs, in particular rent, had eroded profits.

"The directors are aware that, for the company to survive, it will be necessary to radically cut costs and close a number of underperforming stores," Mr Murphy said in an affidavit.

He felt a slimmed-down operation, with further investment, could possibly return to profitability quickly.

He said the company was currently unable to repay the interest due on the loans and was servicing about €900,000 a year in leasing payments.

A break-out into the property market had not proved successful due to the downturn in the economy.

Mr Murphy said an independent accountant believed the company and related firms would have a reasonable prospect of survival as a going concern with new investment, closure of underperforming stores, negotiations with landlords and acceptance of an appropriate scheme of arrangement by the creditors under the protection of the High Court.

He said a number of creditors had taken actions against the company in recent times and there was a petition currently before the court, due to be heard on January 12th, for the winding up of the company.