High Court puts USIT operation into examinership

The High Court has appointed Mr David Hughes, of Ernst and Young, as examiner to the travel company USIT (Ireland) Limited and to two related companies, USIT World.Com and USIT World plc.

Ms Grainne Clohessy, for the directors of USIT Ireland, yesterday told Ms Justice Carroll the examiner's appointment would allow the companies to continue to trade. The companies were hopeful for the future, she added.

In a statement afterwards, USIT said that all of its 14 offices in the Republic were continuing to trade as before, with the usual range of fares and services, including the J-1 visa programme. It added that USIT Ireland, which traded as USIT Now, could assure its customers the company was fully bonded and licensed under the Commission for Aviation Regulation.

Aer Lingus and IATA, the airlines' representative association, earlier agreed to support the examiner's appointment after they agreed terms yesterday with the examiner and companies relating to payment for the airlines for flights booked through USIT.

The petition was also supported by lawyers for Anglo Irish Bank, described as the main secured creditor; the Union of Students in Ireland (USI) and USIT Bureau; some 80 of USIT's employees and the insurance firm Accident and General.

Lawyers for the Revenue Commissioners and the liquidator of USIT Limited (USIT's treasury operation) had expressed some concerns but remained neutral on the application. Mr James O Callaghan, for Scandinavian Airlines Systems (SAS), said his client was owed £770,000 sterling (€1.25 million) and was neither consenting nor objecting to the petition.

After being told terms had been agreed between the examiner and companies in relation to payments for Aer Lingus and IATA, Ms Justice Carroll made an order for Mr Hughes's appointment as examiner. He has held the position of interim examiner since February 4th.

The judge also directed, on the application of counsel for the Revenue, that VAT, PAYE and PRSI should be paid as they fell due. Ms Clohessy said the books and records of the companies were up to date in relation to their tax affairs.

The judge noted the examiner had expressed some concerns about the long-term survival of USIT World plc, which holds 100 per cent of the shares in the other two companies.

Ms Clohessy said the directors believed all three companies should be under the court's protection and if the examiner believed at any stage that protection should not be afforded to USIT World plc, he could apply to the court immediately.

A solicitor representing USI and USIT Bureau asked the court to direct the appointment of a committee of creditors to assist the examiner.

Ms Justice Carroll said that application could be made to the examiner and if it was refused, and the applicant believed that refusal was wrong, they could then apply to the court. In an affidavit grounding the application for the examiner's appointment, Ms Mairin Colleary, a director of USIT Ireland, said the business of that company was essentially sound and the company, subject to certain conditions being met, including the appointment of an examiner and the implementation of a scheme of arrangement, had a reasonable prospect of survival.

She said the company would be solvent were it not that some €15 million (£11.8 million) had become irrecoverable.

Mr Michael Cush SC, for Mr Hughes, said his client believed the level of trading showed there was a core business in USIT Ireland.

He said a significant injection of equity was required and the Student Travel Association (STA) - which acquired 82 per cent of the shareholding in USIT World plc on January 23rd last - was willing to enter talks in relation to an appropriate scheme of arrangement.