One of the many issues that arose from the gathering of Atlantic Computers’ creditors last week (CI No 1,466) was the on-going disagreement between Norwich Union, Allied Irish Bank, and administrators, Price Waterhouse. All three are awaiting the appeal verdict on a recent court case that established that the head funders are entitled to receive money not as debts, but as expenses of the Administration (CI No 1,448). John Soden, joint administrator of Atlantic Computer Systems, says that if the judgement stands, both companies will have pre-preferential status. Consequently, the Administration would be unable to meet its own expenses because of the shortfall of assets. That would undermine the administration process and possibly lead to loss of control. In such circumstances, Soden would have to consider whether discharge of the administration order and immediate liquidation would be an appropriate course of action. The Court of Appeal will give its judgement this week, and Soden claims the initial indications are that the first ruling will be overturned. However, at the creditors’ meeting, both Allied Irish and Norwich Union tabled a strongly-worded modification to the Price Waterhouse proposals. In a letter circulated to attendees, the two funders state that they are certain there is no realistic prospect of their interest being best served by further involvement in the administration, and that co-operation will not be forthcoming. The modification proposed that funders be free to deal directly with end users without interference or fetter by Atlantic Computer Systems or the Administrators. Secondly, that Price Waterhouse consent to the termination by funders of agreements with Atlantic Computer Systems, and if necessary, the repossession of equipment owned by funders. The modification was rejected by 90m to 20m votes, and Price Waterhouse’s own amendment was accepted by the creditors. It states that the Administrators will seek a joint approach which allows Atlantic Computer Systems to withdraw from contractual arrangements with funders and lessees as soon as possible on mutually agreeable terms. This means that lessees will make payments direct to funders, which will undoubtedly benefit the latter, although some users may be unhappy at the prospect since it raises the spectre of repossession. Another proposal that occasioned controversy is the inclusion of British & Commonwealth Group Finance on the Atlantic Plc creditors’ committee. The five-man committee is made up of Midland Bank which is demanding repayment of UKP71m – Credit North, Barclays Bank, a former Atlantic employee who claims to represent small creditors, and B&C Group Finance. Given the possibility of litigation against British & Commonwealth and the potential for conflicting interests, some of the smaller creditors felt that B&C Group Finance should stand down.
Criticism
When it was put to the vote, B&C Group Finance retained its place by 94.2m to 30.5m shares, but it was undoubtedly the larger institutions that carried the motion. There was also a value vote on the creditors’ committee for Atlantic Computer Systems, and although the count was incomplete, John Soden says it will include two funders and Midland Bank. British & Commonwealth is not a creditor and not entitled to a place. There has been criticism of the way Price Waterhouse has handled the administration process, and when asked how much it is actually costing, the Administrators were reluctant to set a figure. The creditors of Atlantic Plc were eventually quoted UKP3,000 per week, and the creditors of Atlantic Computer Systems were told overheads are running at UKP150,000 per month. Peter Padmore later informed the press corps that the Administrators would be seeking approval from creditors’ committees for fees, and he felt it in-appropriate to discuss the matter before that time. Whatever the costs, they look set to run for a considerable period since Padmore anticipates that the intense activity will continue for at least another 18 months. And at the end of the day what cheer can he
offer creditors? His gut feeling is a few pence in the pound. – Janice McGinn
