AER ARANN’S future was secured yesterday after Ms Justice Mary Finlay Geoghegan agreed in principle to approve a modified scheme of arrangement put forward by the airline’s examiner.
This followed an 11th-hour deal between the Revenue Commissioners and Stobart, a British transport and logistics group that proposes to inject €2.5 million into Aer Arann.
The Revenue Commissioners will now receive €436,000 that it is owed as a super-preferential creditor within 19 months. Previously, it was proposed that the Revenue would receive half this amount within 13 months, with the balance contingent on Aer Arann’s net profit in 2011 exceeding €2.4 million.
The marathon hearing lasted just over four hours. At one point, it seemed Ms Justice Finlay Geoghegan might adjourn the hearing or not approve the scheme after strong objections from the Revenue Commissioners regarding the manner of its treatment relative to other creditors.
A number of creditors are to be paid their debts in full outside the terms of the scheme. These include AIB, which is owed about €5.2 million, the Dublin Airport Authority, owed €1.9 million, and aircraft lessors.
Jennifer O’Connell, representing the Revenue Commissioners, argued that her client had been “disproportionately disadvantaged” by the proposed scheme compared with these creditors.
Dermot Murphy, for the company, said these creditors were necessary to the future operation of the business, and had to be dealt with separately and in a different way. Ms O’Connell said the Revenue was “in effect being asked to fund this arrangement”.
The judge asked why the €218,000 that was contingent on Aer Arann reaching a certain profit level could not be paid along with the other instalments over the 12-month period.
Jarlath Ryan, for Stobart, said this would represent a “material” change to the scheme, and its investment would be “unviable”.
The judge then asked why she should accept that Aer Arann had a viable future if a sum of €218,000 could not be repaid over 12 months.
Mr Ryan said it was a “significant” sum in the context of airline operating margins. He subsequently asked for a break to consult with Stobart, and a compromise proposal was agreed with Revenue just before 6pm.
Under the scheme, creditors will receive €2.2 million in payment of their debts. A group comprising Aer Arann owner Pádraig Ó Céidigh and Stobart will take control of the airline and invest €3.5 million in the business.
It also emerged yesterday that another investor – businessman Tim Kilroe jnr – had agreed to invest €2.2 million into Aer Arann if the scheme was approved by the court.
The Revenue will now get 22 per cent of the €436,000 it is owed within 29 days. The balance will be paid in instalments over the following 18 months.
“I am now satisfied that the modified proposals . . . will give this company a reasonable prospect of survival as a going concern,” Ms Justice Finlay Geoghegan said.
The judge directed that the modified scheme be lodged with the court by 3pm today. A hearing will take place on Friday to make the orders to confirm the scheme.
Rossa Fanning, representing the examiner, Michael McAteer of Grant Thornton, asked for the effective date of the scheme to be noon on November 10th.
Ms Justice Finlay Geoghegan extended the period of protection under the examinership until Friday. She wished everyone “good luck with the implementation of the scheme and the future prospects of the company”.
