Xtra-vision outlets to operate as normal, court hears

XTRA-VISION’S outlets will continue to operate as normal following the appointment of an interim examiner to the company, the High Court heard yesterday.

The company, which has 1,300 employees in more than 180 stores on both sides of the border, sought the protection of the courts from its creditors because it is insolvent and unable to pay it debts as a result of cash-flow difficulties.

Xtra-vision’s difficulties have been caused by factors including falling revenues and a decision by two providers of trade credit insurance to Xtra-vision’s suppliers to withdraw their coverage.

Yesterday at the High Court, Mr Justice Patrick McCarthy said he was satisfied to appoint David Hughes of accountancy firm Ernst and Young as interim examiner of Xtra-vision Ltd after being informed that an Independent Accountant’s Report has shown that the company has a reasonable prospect of survival.

Rossa Fanning, for Xtra-vision, told the court that the company was petitioning the court for the appointment of an examiner because despite the current difficulties the directors believe that the company is a good viable business.

Figures contained in the Independent Accountant’s Report show that the vast majority of its stores are profitable.

Counsel added that the company, which was incorporated in 1980 as a video rental outlet had diversified its services in recent years and now both sold and rented DVD and blu-ray movies, video games, hardware and confectionery.

The company, which was once listed on the Irish Stock market went into examinership in the mid 1990s, before being sold to US group Blockbuster. In 2009 the US firm sold Xtra-vision to Irish firm Birchall Investments.

Counsel said that Birchall are prepared to invest another €6m in the company if a scheme of arrangement can be firstly agreed with the Xtra-vision’s creditors and then approved by the High Court.

Counsel said that the €6m investment displayed this examinership application was not a “hit and hope” effort and it was an appropriate case for an examiner to be appointed.

Counsel said that a number of factors had combined to leave Xtra-vision in a position where they were unable to pay their debts as they fall due. Xtra-vision’s revenues had dropped from €159m a few years ago to current levels of approximately €107m.

Counsel added that more recently Xtra-vision did not enjoy a good trade period over the Christmas and New Year period due to the weather conditions, had a poor trading period between January and March, and has been hit by illegal downloading of movies from the internet.

In addition, the decision, made two weeks ago, by the two trade credit insurers Euler Hermes and Atradius, resulted in Xtra-vision’s suppliers demanding cash payments before they would provide any new products. That decision, counsel said, resulted in a “serious and intolerable cash-flow situation,” for Xtra-Vision.

High rents were also cited as a cause of the company’s difficulties. Counsel said that in recent years the company had taken steps to reduce its overheads.

However, it had only been able to reduce its property rental costs by just 8%, and it was anticipated that as part of an examinership process it would apply to the High Court to repudiate a number of rental agreements it had entered into with landlords.

Mr Justice McCarthy, who noted the number of jobs involved and that further investment in the company was proposed, said that this “was an appropriate case” where an interim examiner should be appointed.

The judge made the matter returnable to later this month, when the courts resume from their Easter break.