USIT rescue plan fails to get support of Aer Lingus

Aer Lingus has refused to support the rescue package for USIT Ireland being put together by Ms Gillian Bowler.

It is understood that Ms Bowler wanted the airline - which is the biggest supplier of tickets to the company - to agree a new five-year deal.

Airline sources said the deal being offered to the airline was not commercially viable and was virtually risk free for Ms Bowler and her partners.

The examiner of USIT Ireland - Mr David Hughes of Ernst & Young - is now seeking a two-week breathing space in which to cut a deal between Ms Bowler and Aer Lingus or else come up with a fresh rescue package. He will hear today whether or not the High Court will extend the protection from its creditors that USIT Ireland has enjoyed since February.

Similar protection granted to USIT World - the group parent - is likely to be lifted today, forcing the company into liquidation.

Sources close to Aer Lingus said the airline was happy with most of the proposals put forward by Ms Bowler but that the deal on ticket prices was a "deal-breaker". Other elements of the package include a contribution towards the Aer Lingus marketing budget and assurances than the company will have a completely fresh management team.

If a deal cannot be hammered out between Aer Lingus and Ms Bowler, the examiner may reopen discussion with STA, USIT's larger rival, believe informed sources. Mr Hughes had been in talks with STA prior to the emergence of the Bowler consortium.

STA bought 82 per cent of USIT World for €1 in February and then put the company into examinership with a view to restructuring it.

The Swiss-owned group committed itself to providing €600,000 in working capital to keep the company going during the reorganisation but talks with Mr Hughes did not reach a successful conclusion.

Ms Bowler is heading a consortium prepared to invest €2.5 million into the company provided Aer Lingus and the other creditors agree to a restructuring.

The restructuring would see the creditors receive only a fraction of the money they are owed.

The High Court is unlikely to sanction any restructuring in which one creditor or group of creditors receives preferential treatment.

Consequently problems could arise if the deal struck with Aer Lingus were considered overly favourable to the airline.

Ms Bowler and her husband Mr Harry Sydner are backed by Dublin-based Ion Equity and two unidentified Irish property developers.

Sources close to the negotiations say that Mr Gordon Colleary, the founder of the group, will have no stake or role in the group going forward. It is understood that Aer Lingus is also opposed to his wife, Ms Mairin Colleary remaining as a director.

Mr Colleary and his wife built USIT up over 44 years into an international group with a turnover of $600 million (€665 million) and more than 200 offices worldwide before it got into difficulties late last year.

The collapse began after National Irish Bank appointed to liquidator to the group treasury company amid allegations of fraud.