A scheme for the survival of 28 Chartbusters home entertainment stores employing 172 people has been approved at the Commercial Court.
While noting that the scheme effectively allows the group to 'walk away' from pre-examinership debts amounting to some €15m in the event of a winding up, Mr Justice Peter Kelly said it at least meant creditors would get more than if the company were put into liquidation.
The scheme provides for creditors to receive, at most, 10% of their dividend, while many will receive between just 2.5% and 5%. Various creditors represented in court expressed support for, or were neutral towards, the scheme with some seeking minor modifications which were approved by the judge.
The scheme also provides for new investment of some €700,000 and for a new management structure at Chartbusters, with its founder Richard Murphy leaving the group by December 31 and ceasing to have any shareholding.
The majority shareholding, 51%, will be held by John McCabe, and the remaining 49% will be held by Catherine Kenny and Anthea Jordan.
Outlining the scheme, Rossa Fanning, for examiner Neil Hughes, said the examiner had been sensitive to concerns expressed about the management of the company and had told creditors' meetings he would be recommending Mr Murphy should no longer be involved, in order to provide 'a fresh start'.
The examiner had since modified his position as Mr Murphy had had a role in introducing investors to the company and those investors wanted Mr Murphy to remain on for a while to ensure continuity, counsel said.
Mr Fanning also said concerns about future banking facilities had been resolved and Bank of Scotland Ireland was to continue banking the group following the lifting of court protection.
He added that concerns expressed previously about the future of the Phibsborough and Tallaght stores had been eased. He said the worst-case scenario now was that there might be some concern about the Tallaght store only, but the examiner believed this was unlikely to be affected.
The court heard the stores were trading profitably in examinership, helped by substantial rent reductions negotiated by Mr Hughes. Counsel added that the costs of the examinership, including legal fees, amounted to some €300,000.
Confirming the scheme, Mr Justice Kelly said it would retain 28 stores and 172 jobs and this was a very important consideration. There would also be a complete change in the shareholding.
While the scheme provided for a very substantial writedown of creditors' entitlements, it was preferable to a winding up. He was satisfied the criteria for approval had been met and there was a reasonable prospect of survival of the companies.
Given the approval of the scheme, the judge made an order lifting court protection from noon tomorrow. Court protection was previously lifted for one of the companies in the group, a non-trading leasehold holding company, Stanway Holdings Ltd (SHL), and an application for voluntary winding up of that company is being pursued.
The judge appointed Mr Hughes examiner to the group on January 26. Chartbusters was incorporated in 1993 as a video rental business. As a result of competition and changes in technology, it diversified into internet services and tanning booths.
