Interim examinership for B&Q Ireland

DIY chain B&Q Ireland Ltd has been placed into interim examinership following a hearing at the High Court this afternoon.

This gives the company protection against its creditors for up to 100 days while the DIY chain attempts to restructure the business and formulate a survival plan to put the business back on a viable financial footing.

Declan McDonald of PwC has been appointed as interim examiner.

Under a proposed restructuring, stores in Athlone and Waterford – which employ 92 staff between them - would close.

B&Q will also attempt to substantially improve its rental agreements with landlords. B&Q said it will continue to trade as normal during the examinership process. All staff and suppliers will continue to be paid and gift vouchers and credit notes will be honoured during the process.

The company employs 690 people, made up of 190 full time positions and 500 part-time jobs, in Cork, Galway, Liffey Valley, Limerick, Naas, Swords, Tallaght, Athlone and Waterford.

The company believes seven stores could be viable if rents are substantially cut and other cost-cutting measures are implemented. It is paying some €11.6m rent for the stores and has been advised that is about €5.8m above open market rents.

All vouchers, credit notes and deposits will be honoured by the company throughout the examinership period, the court also heard. The petition for examinership was returned to February 12th.

Seeking the interim examiner, Rossa Fanning, for the company, said it was insolvent with liabilities of more than €17m to its parent company, Kingfisher plc, but has no bank or revenue debts. Its turnover had fallen 24.2 per cent from a peak €124m in 2009 to some €94.2m in the financial year to end January 2012. A loss of some €20.5m is forecast for the year ended January 2013, including restructuring and loss making provisions.

Kingfisher had written to the company earlier this week saying the business was not sustainable with its current cost base and that the levels of support required by the company were no longer feasible. Kingfisher had also indicated it would provide financial support to the company if it was under court protection so as to enable it meet the cash flow projections in an independent accountant's report. Kingfisher also indicated it would be interested in making new investment in a restructured business of the company.

Given that letter, the directors of the company - Brian Mooney, Ratoath, Co Meath and Diarmuid Walsh, Carlingford, Co Louth - resolved the company could not continue to trade without the support of Kingfisher and decided to recommend to Kingfisher International Finance SA that a petition be filed for examinership.

Mr Justice Peter Kelly said he was satisfied to appoint Mr McDonald as interim examiner and to grant court protection on the basis of evidence including the opinion of an independent accountant the company has a reasonable prospect of survival in whole or in part once certain conditions are met.

In a statement, Mr Mooney said: “The management team is hopeful that a sustainable business can emerge from the examinership process, based on a restructuring of the company.”

Retail Excellence Ireland said the news was no surprise, and predicted others would follow, blaming the "rigorous enforcement of Celtic tiger rents" by landlords.

"We have clearly stated to successive Government that the continued existence of upward only rent reviews is causing significant damage to job numbers and the ability of retailers to remain trading. The majority of retail tenants now pay more on their rent than on their total labour force," said REI chief executive David Fitzsimons said. "If Government does not legislate, 2013 will witness an unprecedented level of retail industry failure."

Source : Ciaran Hancock & Mary Carolan – IrishTimes.com
www.irishtimes.com/newspaper/breaking/2013/0131/breaking21.html