High court appoints examiner to Chorus

In what is believed to be the second-largest examinership here, the High Court has appointed a Dublin accountant, Mr John McStay, as examiner to Chorus Communications Ltd and its related company Princes Holding Ltd (PHL). The largest examinership concerned the Goodman group of companies.

The court heard that Chorus, which has 550 employees, was believed to have a reasonable prospect of survival, particularly given an injection of investment by Liberty, the international media group.

Making the appointment yesterday, Mr Justice Kelly said it was quite clear that unless an examiner was appointed, there would appear to be little option but to liquidate the companies. The estimated shortfall in such a liquidation would be about €490 million.

The court was told that 80 per cent of the 18 banks which are owed €220 million supported the appointment and that the other 20 per cent were "neutral".

The court was also informed that Liberty was willing to loan €4 million to Chorus during the period of the examinership. Mr McStay stated that two other parties were seeking information with a view to formulating an investment offer.

Mr Denis McDonald SC, for Chorus, which brought the petition, said it was primarily involved in the re-transmission of TV signals to about 200,000 households and businesses in the State.

Chorus was currently unable to pay its debts. Last month it could not pay interest to its bankers or its Revenue liabilities. PAYE and PRSI payments for December 2003 and VAT for November and December came to €3.4 million and historic liabilities had also to be added.

Chorus was claiming that it and its holding company PHL had a viable business. They believed that the losses sustained in the current balance sheet were largely a consequence of historic activity, a significant part of which was attributable to businesses acquired in 2000, at a time when the telecommunications industry was at its peak and when values were at a premium.

That industry had suffered over the past few years and the value of the business which Chorus acquired had had to be written down considerably.

There had also been trading losses. Chorus also encountered considerable competition from BSkyB in the operation of its businesses.

One of the priorities for Chorus was to be in a position to be able to compete effectively with BSkyB by finding the investment to develop a full range of digital services.

Chorus and PHL believed past indebtedness could be dealt with by way of a scheme of arrangement.

Relating to fresh investment, there was already a significant expression of interest and this was before the court in a confidential exhibit. A business plan had been examined by a number of national consultants and they all believed it formed a basis for the future.

If an examiner were appointed, then Liberty, now the ultimate shareholder in PHL, had agreed to make available a loan facility of up to €4 million. It had not been necessary to draw down any of those monies to date and the company's cash position had recently improved.

Appointing Mr McStay, Mr Justice Kelly said independent accountants believed the company had a reasonable prospect of survival, in particular because of the injection of new investment by Liberty to fund future capital investment programmes and a scheme of arrangement for creditors.

There was no doubt that both companies were in very substantial difficulties and insolvent within the technical meaning of that term under the Companies legislation.

The most persuasive elements in appointing Mr McStay were the views of the independent accountants and Mr McStay himself, the judge said.

The independent accountants believed there was a reasonable prospect of survival because of the interest of Liberty. There was also the support for examinership of 80 per cent of the banks.