Rathwood rescue plan confirmed by the High Court

High Court reporters

The High Court has endorsed a plan to rescue the troubled home and garden retailer Rathwood.

Rathwood, a business controlled by the Tullow, Co Carlow-based Keogh family, entered examinership in late April. The company has total liabilities of over €21 million, according to recent figures provided to the court.

Judge Rory Mulcahy on Friday said examiner Padraic Bermingham’s rescue plan satisfied conditions required under the Companies Act 2014. He confirmed the plan, known as a scheme of arrangement.

The confirmed rescue plan will see an external investor come on board and new management take control of the business. The plan provides for the continuation of the business and the retention of its 62 employees.

One creditor, Carlow Warehousing Ltd, objected to the confirmation of the rescue plan. Carlow Warehousing sought a modification to the plan in circumstances where it alleged the proposed plan would leave it in a worse position compared to a scenario where Rathwood was wound up.

The judge rejected a submission on behalf of Carlow Warehousing that it was unjustly prejudiced by the rescue plan.

In ruling on the confirmation of the rescue plan, the judge said the manner in which the business was managed prior to its entering examinership remained of “significant concern” to the court, noting the rapid deterioration in the company’s fortunes in recent years.

If there was wrongdoing during that period, the judge said that in confirming the rescue plan, those liable for any potential wrongdoing will escape that liability. He noted that at present there was no finding of wrongdoing against any party.

Balanced against the retention of jobs and other benefits under the rescue plan, however, the judge said it was not appropriate to reject the plan on foot of those concerns.

On the application of barrister Stephen Brady, for Bermingham, instructed by BHSM LLP, the judge confirmed the rescue plan.

Keith Farry, for the Keogh family directors of the company, instructed by Brady Kilroy Solicitors, said his clients were undertaking to the court not to act as directors of the company for a period of 5 years.

Sally O’Neill, for Revenue, said her client retained its concerns about the prior management and governance of the company.

The company has an outstanding tax bill of some €2.4 million, and while Revenue did not object to the rescue plan, O’Neill said it was reserving its position in respect of Farry’s clients.

The judge commended the work of the examiner at the close of the confirmation hearing, and thanked the various legal teams.