HOME ENTERTAINMENT chain Xtra-vision is under court protection from its creditors following a hearing yesterday at which David Hughes of Ernst & Young was appointed interim examiner to the company.
Its parent, Birchall Investments, said in a statement issued after the hearing yesterday that the company’s revenues had fallen in line with the rest of the Republic’s retail sector and pointed out that it had cut costs to bring them in line with this. However, it added, the company “has failed to secure commensurate reductions in property rents despite strenuous efforts”.
Mr Justice Brian McGovern appointed Mr Hughes as interim examiner at a hearing in the High Court in Dublin yesterday. The case will return to the court on May 12th, when it is likely Xtra-vision will seek to have the examiner’s appointment confirmed.
Birchall Investments said Xtra-vision’s 181 outlets would continue to trade normally during the term of the examinership.
Examinership is a corporate rescue mechanism that allows companies in difficulty up to 100 days to restructure their businesses under the courts’ protection. In order to avail of it, companies must demonstrate that they have a reasonable prospect of survival. The examiner has to draw up a rescue plan, known as a scheme of arrangement, which the court must approve.
Birchall Investments said yesterday that, subject to the High Court’s eventual approval of a rescue plan, it would be willing to invest whatever money was needed into the business.
The court heard two firms recently withdrew credit insurance from a number of Xtra-vision’s suppliers. The insurance guaranteed these businesses against loss should Xtra-vision fail to pay its debts.
The move meant suppliers could no longer extend normal credit terms to the chain, which in turn forced Xtra-vision to ask the court to appoint an examiner.
It is understood that the two credit insurers operating in the Irish market, Atradius and Euler Hermes, are concerned at the risks posed to retailers and other businesses by excessively high rents.
The law does not allow rents to be reduced when they are reviewed. As a result, landlords are continuing to charge rents agreed during the property boom and which do not reflect current trading conditions.
Xtra-vision’s obligations mean that it is paying rent on a number of outlets from which it is not trading. The examinership process allows companies to repudiate, or exit, onerous leases. Xtra-vision’s lawyers pointed out that a number of successful examinerships, including Four Star Pizza, recently used this provision.
The business has no bank debt, and along with the leases, its only liabilities are those due to the Revenue and suppliers.
