Four Star Pizza creditors repaid 7% of debts

UNSECURED CREDITORS were paid just 7 per cent of their debts under the rescue plan for fast-food chain, Four Star Pizza, which emerged from examinership recently with the backing of hotelier Michael Holland, The Irish Timeshas learned.

The High Court granted its parent company, Zowington, protection from its creditors and appointed Neil Hughes of Hughes Blake as examiner last November.

Last week, the court approved a rescue plan put together by Mr Hughes and supported by its creditors.

Under its terms, unsecured creditors were paid 7 per cent of their debts.

The Revenue Commissioners received all PAYE and PRSI payments due to them, and 50 per cent of their preferential debts.

The €4.9 million due to National Irish Bank was refinanced.

Mr Holland’s company, Gonville, pledged to invest €750,000 in the business, which will continue to employ 450 workers.

Four Star Pizza has 40 outlets and is the second-largest takeout franchise in Ireland.

While its core business proved resilient to the recession, high rents agreed during the property boom forced it into insolvency.

Under the rescue plan, the company was able to repudiate these leases.

This was central to the scheme and to allowing the company to continue to trade.

The landlords involved agreed to new terms.

Examinership is the only means under Irish law of repudiating leases.

Until last year it was not clear if the legislation allowed this, however, the Supreme Court declared that it did in the Irish Linen Supplies case.

High rents are now cited as one of the most common causes of insolvency by trading and retailing companies.

The problem is complicated by the fact that reviews of the majority of commercial leases only allow the rent to be increased, not reduced.

Examinership provides a company with protection from its creditors for up to three months to allow the examiner to put together a rescue plan.

While the system has come under fire, Mr Hughes pointed out yesterday that, if property development companies are excluded, the majority of examinerships are successful and most businesses return to profitability once the process is complete.

Mr Hughes was also appointed examiner to Zumo juice bars and Cafe Bar Deli in Cork, both of which emerged successfully from examinership.