The High Court appointed an examiner to the McSweeney companies on 11 November 2011, rejecting Allied Irish Banks plc’s opposition at that stage. In a written judgment delivered on 21 December, Mr Justice Clarke said there was a reasonable prospect that all or part of the group’s undertaking could survive as a going concern.
The ruling followed a petition presented on 26 October 2011. An interim examiner was appointed the next day, and the substantive petition was heard on 8 and 9 November. The judge said the formal requirements for appointing an examiner had been established; the substantive dispute concerned AIB’s opposition.
AIB argued that examinership could let the existing principal shareholder, Mr Geert Hof, retain control while secured bank debt was reduced, despite what AIB described as poor management and capital previously taken out of the business. It also proposed a trading receivership. The judge expressed no view on whether AIB’s management criticisms were justified.
The judgment records that McSweeney sold pharmacy companies to Celesio in November 2007 for €51.73 million. According to an exhibit to an affidavit from Mr Patrick Durkin, the proceeds included €29.9 million paid to AIB, €10.05 million used to redeem two minority shareholders’ shares, €5.8 million invested in other businesses described as “Hof entities”, €3.63 million for creditors and working capital, a €1.35 million dividend to Mr Hof, and €1 million in transaction fees.
The judge said the pharmacy business could generate a cash surplus, though not enough to service its existing debt. He considered it possible that an examiner could propose reduced debt and address other costs, including rent, while leaving a business able to service its remaining borrowings. The court’s decision was a threshold assessment of reasonable prospects, not a finding that a restructuring would succeed.
The judgment also distinguished examinership from the proposed receivership. A receiver acting for a secured bank could make decisions in that bank’s interests, while a court-approved scheme would govern creditors’ rights, subject to the requirement that it not unfairly prejudice the secured creditor. United Drug, a major creditor, had indicated that it considered its recovery prospects better under examinership than under a trading receivership.
The examiner was expected to seek all realistic investment proposals, not only those involving existing shareholders. The court did not approve any scheme or decide whether a future scheme would be fair. AIB remained free to act on its security over pharmacy companies outside the petition, and could raise prejudice arguments if a scheme were later proposed for confirmation.