The High Court appointed an examiner to Pelko Ltd and its parent company, Pelko Holdings Ltd, after finding Pelko insolvent and satisfied that the businesses had a reasonable prospect of survival if debt restructuring took place.
In a judgment delivered on 28 April 2014, Mr Justice Hogan rejected Bank of Scotland’s argument that the application was premature. He said Pelko was either unable to pay its debts as they fell due or would be shortly unable to do so. The court also found that delaying restructuring risked a disorderly collapse while the companies still had prospects of survival.
The bank, Pelko’s major creditor, had argued that examinership would be premature and that its costs could be excessive and disproportionate. The judgment noted the bank’s concerns that examinership puts security at risk and that secured creditors may bear costs indirectly, but held these were not, by themselves, grounds to refuse an order where the statutory requirements were met.
Pelko manufactures and supplies office and auditorium seating and furniture. The business had been profitable before the 2008 economic crash, but demand fell afterwards. Its workforce was reduced from 17 to 11. The court said that without an examiner, receivership was likely in the near future, with the company’s assets potentially sold to repay debt and the 11 jobs likely to be lost.
The main debt was about €515,000 owed to Bank of Scotland, linked to leasehold premises in North Wall, Dublin 1, used as Pelko’s manufacturing base. The property was valued at €330,000 on the assumption of freehold title, while the remaining leasehold interest, due to expire in 2045, was valued at about €90,000. The judgment said the companies had a reasonable prospect of survival if the bank’s debt and other creditors’ claims were partly written down or restructured.
The Revenue Commissioners had taken a neutral position. The judgment recorded tax arrears of at least €37,520, potentially closer to €52,000, and noted that Pelko could not presently pay those sums immediately. A staged payment arrangement was possible, but the accountant’s report identified acute cashflow problems.
The court said the appointment was appropriate despite the discretionary nature of examinership, because restructuring should happen while the companies retained prospects of survival. The order appointed an examiner to both companies; the judgment did not decide the terms or outcome of any restructuring scheme.