Pierse court protection extended

 

Pierse Contracting has been given one week to convince the High Court to continue court protection to it after a judge today expressed concerns about the companies’ survival prospects and other issues, including a claim it traded for 18 months while insolvent.

The company asked Mr Justice Peter Kelly to appoint John McStay as examiner to Pierse Contracting and Pierse Building Services but the judge adjourned the petition to next Thursday to allow the company respond to his own concerns and several issues raised by creditors. He had insufficient information to decide the matter now, he said.

The judge continued court protection in the interim and also made orders providing for the payment of wages to the companies 109 employees.

Earlier, Paul Sreenan SC, for Kilsaran Road Surafcing and Contrtacting and two related companies owed €2.7 million, said while unsecured creditors were not being paid €51 million owed to them, Pierse appeared to have made huge inter-company loans of some €69.4 million, including a €40 million loan to one company, Rimayne Ltd, which did not seem to be listed in its companies’ structure.

He wanted to know when and over what period the unsecured creditors debts were allowed build up as it seemed unsecured creditors were being asked to “recapitalise” the Pierse companies. These matters should be thoroughly investigated as very little information had been provided.

It was easy for the Pierse shareholders to say they had put some €12 million into the companies since 2008 when a €51 million write off would benefit the shareholders, counsel added. His side could not make allegations at this stage but were raising questions including whether cash coming into Pierse was poured into subsidiaries and whether this benefited anyone in the company.

A €212 million deficit in the event of liquidation was also “astonishing” and needed to be looked at as did issues about the ultimate ownership of the companies.

Counsel added most of his clients’ debt related to the construction of motorway service stations, in which Pierse had a one third shareholding, and was incurred by Pierse in the 90 days before it sought an interim examiner earlier this month. He wanted to know whether Pierse had a conflict in this regard?

Earlier, Rossa Fanning, for the companies, argued there was sufficient evidence on which the court could conclude the Pierse companies have a reasonable prospect of survival, including the opinion of independent accountant Kieran Wallace and the interim examiner’s report.

Pierse is a leading company in the construction sector, the survival proposals identified real projects and were not about “mothballing landbanks”, counsel said. The company had real prospects of obtaining public private partnership contracts, having secured many of these to date. It had a turnover of €300 million at its height and now expected to operate about a quarter of its size.

Counsel said the companies should be given some latitude as it was difficult for all trading in the current economic environment. If the companies went into liquidation, there would be nothing for anyone, he added and only one creditor had opposed the petition.

In response to the issues raised by Mr Sreenan, Mr Fanning said his side no indication these matters would be raised and he needed to take instructions.

Richard McKenna, a sub-contractor, said his was a family company owed €20,000 but had not received one cent and Pierse “don’t want to know”. If that was how Pierse treated men who worked for them, that was “no way to bring a company forward”.

Giving his decision, Mr Justice Kelly said, before he could appoint an examiner, he had to be satisfied the companies have a reasonable prospect of survival (RPS). In that regard, he was concerned about the “highly conditional” nature of the Pierse

Companies’ expectations of getting future work based on contracts funded by public monies, such as the Munster prison complex, the Abbey Theatre redevelopment and various school and college buildings.

Such contracts were “highly problematic” given the state of the public finances and the intention of the government to introduce a “swingeing” budget with cutbacks, he believed.

Mr Justice Kelly also said the independent accountants’ report showed a very serious situation relating to the companies finances with a shortfall of €212 million in a winding up situation. Accountant Kieran Wallace had “very conditionally” said he believed Pierse had a RPS and that view was shared, also on a very conditional basis, by the interim examiner who had relied heavily on representations and information from the companies’ management.

It was also clear at least one creditor had alleged to the interim examiner the companies were trading while insolvent for 18 months and Mr McStay had sought information to review that claim.

The Kilsaran companies had also raised issues to which the court needed answers, he added. There was a chart of companies linked to Pierse, “the usual spider’s web”, registered here and outside the jurisdiction with Rimayne Holdings Ltd and there appeared to be huge inter-company debt and very little information how that came about.

He would give the company and interim examiner an opportunity to address all these issues and adjourn the petition to Thursday, the judge said.