Brian McEnery, Partner and Head of Advisory featured in The Irish Times to discuss Small Company Administrative Rescue Process (SCARP), the new restructuring framework which significantly reduces the court’s role in the examinership process, enhancing SME’s ability to recover and restructure following financial difficulties.
RCC Engineering, a Kerry-based specialist in water and waste engineering, has become the largest case to emerge from the State’s new “examinership-light” restructuring process for small companies, which has seen Priority Construction in Dublin take a controlling stake for a €800,000 investment.
The restructuring saved more than 70 jobs as the company exited the so-called SCARP last month.
SCARP was introduced in December last year to help small firms to restructure through a combination of debt write-down and new investment and is significantly cheaper and less bureaucratic than a court-supervised examinership.
To date, some 14 companies have entered the SCARP process, according to information published in Iris Oifigiúil, the State’s official gazette. Only a handful have successfully exited this to date.
RCC Engineering, which was set up in 2005 and has turnover of more than €10 million, entered SCARP in early August after falling into financial difficulty with €5.2 million of liabilities.
Brian McEnery was appointed as a process advisor to oversee the restructuring. The deal hammered out involved family-run Priority Construction in Clontarf in Dublin investing €800,000, three-quarters of which was made up of equity, with the remainder comprised of a subordinated loan, he said.
Documents on the equity injection, identifying Priority Construction as the investor, were filed with the Companies Registration Office (CRO) in recent weeks.
A company controlled by RCC directors Liam Hickey and Michael Rogers also made a small investment as part of the restructuring, according to the documents.
The fresh money helped Brian strike a deal with creditors that will see so-called super preferential creditors, which relates to social insurance, and secured creditors, led by Bibby Financial, recover all of what is owed, he confirmed to The Irish Times.
Preferential creditors, including Revenue, will recoup 20 per cent of what they are owed, while unsecured creditors will receive 7.5 per cent, with the potential of a follow-on payment as the company pursues payments on certain contracts.
The plan received more than 90 per cent support from creditors last month, well in excess of the 60 per cent in number necessary to push through a SCARP restructuring. Law firm Mason Hayes & Curran also advised on the process.
Efforts to secure comment from Mr Hickey and Mr Rogers, as well as Eoghan McCarthy, managing director of Priority Construction, were unsuccessful.
“SCARP will not be suitable for all companies and where viability is not clear to see, then, unfortunately, liquidation will need to follow for such businesses. However, where viability is present, subject to new investment and creditor support, then we believe SCARP is a real restructuring option,” said Brian.
“We would, however, impress that time is of the essence and if your business is experiencing difficulties we recommend early engagement with an experienced insolvency practitioner.”
Content adapted from The Irish Times.