THE Butler Engineering Group has debts of over £24 million, the High Court was told yesterday by petitioners applying to have an examiner appointed.
Mr Justice Keane said he would give his judgment on whether an examiner should be appointed to the group tomorrow.
The petitioner to Butlers Engineering Ltd and Butlers Engineering International Ltd, Lea Road, Portarlington, Co Laois, is Sureweld International Ltd, Fonthill, Lucan, Co Dublin, and to Data Inputs Ltd, a holding company, Northumberland Road, Dublin, is Sababa Ltd of the same address.
The court was told yesterday that the receiver to the companies, Mr Ray Jackson, two banks, ICC Bank and Irish International Bank (IIB), and a German steel supplier, Preussag Stahl, were opposing the petition.
Mr Donal O'Donnell SC, for the petitioners, said the companies in Portarlington had 129 employees. The group had been the most successful and certainly the largest Irish steel fabricator.
The situation had become extremely grave. The group was insolvent and unable to pay its debts. The indebtedness was £24 million of which the ICC was owed £9.2 million and the IIB £3.67 million. The AIB was owed £2.16 million and the Bank of Ireland £700,000. The German supplier was owed over £1 million.
A receiver was appointed on February 16th on the application of ICC. The application to appoint an examiner was then made.
The petition was presented with the support of the directors, Mr John Donnelly, Mr John Bourke, Mr John McDermott, Mr Peter O'Shea and Ms Patricia Butler. It was also supported by a number of creditors and a number of employees, including trade unions, who sent two letters of support.
The group had taken steps to restructure itself. The process had secured the interest of a number of investors and this had been interrupted by the appointment of the receiver.
The company had secured three new contracts: a new production facility for Hewlett Packard at Leixlip, Co Kildare; a power station at Aqaba, Jordan; and the new international airport at Beirut, Lebanon. The appointment of an examiner was far more likely to allow these contracts to continue in existence.
These contracts would enable the company to survive as a going concern.
The group had taken a number of steps in its efforts to discharge its debts. It had engaged Farrell Grant Sparks as advisers and financial consultants with a view to obtaining investment. Unfortunately, the process of identifying and negotiating with investors was suddenly and unavoidably interrupted by the death of Mr Pat Butler in December 1995. He was the founder, principal director and chairman of the group.
Farrell Grant Sparks had identified a number of potential investors. Some had already visited the premises in Portarlington. The group believed it was worthwhile appointing an examiner to give it the protection it needed during the period in which negotiations could take place between the company and the potential investors.
It was likely the appointment of an examiner would prove considerably more beneficial to the company both domestically and internationally. It was believed the group's cash flow would be sufficient to enable it to discharge its trade and revenue liabilities as they fell due during the protection period. The group had nominated Mr Paddy McSwiney to act as examiner.
Mr Michael Collins SC, for the receiver, said he was waiting for Mr O'Donnell to identify the prospective investor. The companies were trying to say that the court should not try to reconcile the conflicting financial information. There was an enormous deficit of at least £15.6 million.
The petitioners had to satisfy the court that they had some reasonable grasp of the financial situation. However, the auditors to the companies said they were unable to get information and proper books of account had not been kept. They were unable to carry out a proper audit. There was a lack of credibility on the part of the petitioners.
Nowhere was the question addressed of how the examiner was to be funded. The three contracts were not due yet and were not going to produce funds in the short term.
If there was no profit, where would the examiner get the funds and pay, for instance, the wage bill? The receiver paid the wage bill last week as the companies were unable to do so. The first tranche of the wage bill was £160,000 and there were no funds there to meet it.
They had a problem with British Steel and temporarily solved it by bringing in Preussag but that company was owed a substantial amount and was opposing the petition.
There was a lack of knowledge as to how much deficit there really was, what were the cash flow requirements and what investors were there to put up money.
Another peculiarity was the role of the directors. The petitioners were minuscule creditors. It appeared the directors were unable to bring the petition for whatever reason.
Mr Peter Kelly SC, for ICC and IIB, said he would adopt the submissions made by Mr Collins. He said it was clear the examiner, if appointed, would not be an examining examiner but a borrowing examiner. No doubt he would have to borrow large sums of money and the identifiable prospects should be looked at very closely.
In the circumstances and weighing up all the factors, the test that there was some prospect of survival was utterly unreal, Mr Kelly said.
Mr Denis McDonald, counsel for Preussag, said his client was a manufacturer and supplier of steel and the last thing they wished to see was a customer close. However, on consideration of the facts, they had concluded that the company was incapable of carrying on business. There was nothing in the evidence that demonstrated it was capable of survival. Nowhere were there any letters from any prospective investors.
His client had estimated that at least £1.5 million worth of steel would be needed to satisfy the three contracts. Nowhere in evidence had the companies indicated they could obtain steel of that magnitude.
The court was told the Revenue Commissioners were neither supporting nor opposing the petition. Four trading creditors with a debt of £409,886 altogether were supporting it.
Ms Nuala Jackson, counsel for the companies, said the directors were supporting the petition.