High Court appoints examiner to Modern Network

The High Court has appointed an examiner to Modern Network Limited (MNL), the company at the centre of an Oireachtas inquiry into a signalling contract at Iarnrod Eireann.

Despite debts of £12 million (#15.24 million), which the telecommunications company described as due to "exceptional losses", the court heard its interim examiner and consultants, Arthur Andersen, believe it has a reasonable prospect of survival.

Mr Justice Kelly noted that none of MNL's creditors objected to the proposed appointment of an examiner. He also noted the "remarkable" situation where MNL was not in debt to the Revenue Commissioners and intended to continue meeting its tax obligations.

Earlier, in moving the petition, Mr Bill Shipsey SC, for the board of MNL, said it was a substantial company with 120 people employed directly and 120 other jobs indirectly dependent on it.

Its business included providing external communications network services for the Irish telecommunications market, construction of mobile phone base stations, providing Internet access to housing estates via radio signal rather than cable and providing services for Eircom.

It also provided railway signalling services and acted as agent/distributor for a number of companies in Ireland, in particular Draka Norsk Kabel and Radio Frequency Systems, which were its largest creditors.

MNL, with a registered office at St John's Court, Santry, Dublin, had a history of profitability up to and including March 1999 but in 2000 and 2001 it had sustained losses which, his clients argued, were exceptional and attributable to difficulties experienced in relation to a Mini CTC (Centralised Traffic Control) contract with Iarnrod Eireann - a contract involving the replacement of the mechanical signalling systems with a centralised electronic system.

Mr Shipsey said there had been delays and difficulties in relation to this contract which remained a subject of dispute with Iarnrod Eireann. MNL had expected to receive £2 million from Iarnrod Eireann under an agreement which MNL understood to have been secured last March but, on June 21st last Iarnrod Eireann had terminated the contract. MNL also contended it was owed a further £830,000 from it for the laying of cable.

MNL had had also to make provision of £2.5 million for the replacement of defective cabling, counsel noted.

The court heard MNL was awarded a contract last February to provide, build, renew and upgrade services to Eircom for its copper network. It was expected the contract would be worth £10 million in the first year.

Shareholders had injected £1 million in further share capital into MNL last September and further funds would be available. There were also indications of investor interest. Mr John O'Donnell presented a report from the interim examiner, Mr Jason Sheehy, which concluded the company has a reasonable prospect of survival. Mr Conleth Bradley, for Iarnrod Eireann, said it contended there was no agreement regarding payment of £2 million or £830,000 to MNL and was also reserving its right to call in an advance payment guarantee of £690,000. His client was neutral in relation to the appointment of an examiner to MNL. Mr Sheehy was appointed as examiner.