The High Court has appointed provisional liquidators to four companies in the well-known USIT student travel group, employing 149 people, after the coronavirus crisis caused their collapse.
Severe restrictions on international travel as a result of the pandemic has lead to cancellations of many spring and summer travel bookings and tours for students and school groups and an immediate collapse of new bookings, causing a cash flow crisis leaving the companies insolvent and unable to pay their debts as they fall due, Rossa Fanning SC, for the companies, outlined on Friday.
The companies had received booking deposits and pre-payments from a large number of customers with some €1.2m owed to pre-booking creditors, including some 3,000 students who paid deposits of €299 or higher sums for intended travel to the US this summer.
USIT Ireland Ltd is a bonded travel agent and that may allow for refunds of deposits, he said. Travel insurance or credit card companies may provide "an alternative route" for refunds.
Ms Fanning said, as a result of cancellations and lack of new income over the coming months, the companies lack the financial resources to continue trading through to October 2020 and cannot raise the necessary €3.3m funds to do so.
There was also debt to Ulster Bank of €1.7m and the directors had decided there was no option but to wind-up the four companies and petition for the appointment of joint provisional liquidators.
This was entirely a result of the “catastrophic” impact on international travel of the Covid-19 pandemic because, up until a few weeks ago, all but one of the companies have been largely profitable and there was no issue about the management of the businesses.
USIT Ireland had forecast it would generate earnings of some €700,000 in the financial year ending October 2020 and, until a number of weeks ago, its business was on track to achieve this forecast, he said.
Bookings for the US summer work and travel programme were well up on 2019 and bookings for travel to Australia and Canada were performing better than 2019.
This position "suddenly and dramatically changed" with the emergence of the Coronavirus pandemic across Europa and the US in February and March.
The directors very much regretted making this application but it was “beyond their control”. The company was unable to ensure employees would be paid to the end of March, he added.
Mr Justice Mark Sanfey granted orders on Friday evening to Mr Fanning, with John Lavelle, instructed by William Fry solicitors, for the appointment of Kieran Wallace and Andrew O’Leary of KPMG as provisional liquidators to the four companies, with addresses at Aston Quay, O'Connell Bridge, Dublin.
The companies are Kinlay Group Ltd, the holding company; USIT Ireland Ltd, the principal trading company; School and Group Tours Ltd and Dublin College of Business Studies Ltd.
USIT Ireland specialises in US summer work and related travel programmes; School and Group Tours Ltd is involved in organising school tours to European destinations and DCBS operates a school at Abbey Street, Dublin 1, trading as the English Studio Dublin, teaching English as a foreign language.
DCBS has struggled financially in recent years and recorded an after tax loss of some €650,575 in the year to October last, the court heard.
Mr Justice Sanfey said it was an “entirely unfortunate situation”.
He, like hundreds of thousands of Irish students, had availed of the services of USIT a long time ago. “It is sad it has come to this."
The nature of USIT’s business meant it was "particularly seriously affected" by the pandemic and he hoped many other businesses affected will continue in business.
The interconnected nature of the USIT companies means it is very difficult for any of them to survive, he said.
The holding company owes €1.7m to Ulster Bank and that is cross-guaranteed by the three other companies.
USIT Ireland is entirely dependent on its summer trade and has cash flow requirements making it "completely impossible" to survive through this summer.
He noted the directors - David Andrews, Harbour Road, Dalkey, Dublin, Niall McHugh, Wilfield Park, Sandymount, Dublin and Elaine Russell, Knocksinna Park, Foxrock, Dublin - had considered seeking examinership but concluded that was unviable.
Given the fluid nature of the businesses, especially of USIT Ireland and that a multiplicity of people are affected, it is appropriate to appoint provisional liquidators as sought, he said.
He hoped that would give the companies "breathing space to rationalise their affairs and ensure everybody is treated fairly".