IT is not in the least surprising that Irish Continental Lines (ICG) pulled out of the proposals to rescue Bell Lines. While it has a 25 per cent stake in Bell, as a publicly quoted group it would have been foolhardy to agree to participate in the restructuring which had so many loose ends.

The only risks associated with normal restructuring programmes are commercial ones and they are often daunting enough. But ICG cited risks such as legal threats from Waterford Harbour Commissioners (WHC) and senior management on the Continent, and considerable and unforeseen expenses for its Irish and British pension schemes.

There was also a real possibility of a protracted delay in getting clearance under the monopolies and mergers legislation. With Bell's losses running at some £0.75 million per month (admittedly during a lax period), a delay could have been extra costly. With such imponderables facing it, ICG, and its investment partners, NatWest Ventures and Citicorp Venture Capital, had little option but to pull out of the restructuring proposals recommended by examiner, Mr David Hughes.

The pullout from the restructuring will not cause ICG any pain. It has already taken the knock - ICG's share of losses from Bell came to £1.59 million in 1996. Also it made a provision of £1.6 million against the subordinated loan it made to Bell when the investment was made in 1993. This is now nil in its books, so it should receive no more knocks from Bell.

But the proposed new investors - understood to be headed by Mr Ian Duffy, acting chief executive, who set up Aquaporte before selling it to Ballygowan - now face the same problems which ICG, and its partners, ran away from. So why should they have any better luck?

While creditors other than WHC have expressed reservations to the examiner's proposals, getting WHC on board to any new proposal will be crucial. An agreement signed between Bell and WHC in 1992 inextricably linked the two companies. So much so that one is almost an associate of the other. Having such an interdependence usually works when things are going right but one will pull the other down if things go askew.

These are some of the main provisions in the agreement:

. WHC agreed to give Bell priority use of the port with an option for a further 10 years on terms to be agreed.

. WHC to equip the terminal with "adequate cranes" but Bell contracted to operate the cranes and be responsible "for all care and maintenance".

. Bell agreed to pay WHC an annual throughput guarantee of £300,000.

. Bell to pay an annual contribution of £200,000 towards dredging costs.

. Bell to pay WHC a throughput charge at a TEU rate of £5.10 per TEU in excess of 175,000 TEU's annually in addition to the throughput guarantee of £300,000 annually.

. Bell to provide income sufficient to discharge the interest and capital cost to WHC's borrowings to a maximum of £8.5 million for one gantry operation and to a maximum of £10 million for a two gantry operation.

. Bell to pay a minimum annual payment of £300,000 for the use of the Frank Cassin Wharf based on a guaranteed minimum throughput of 300,000 tonnes.

The scheme of arrangement proposed changes to some of these agreements. Bell has not made payment to WHC since October 1996 when two cranes collapsed. WHC is now claiming £607,652 and if this is upheld, 25p in the pound would be paid.

Bell's payments of all future capital and interest would be reduced to 40 per cent (this would increase to 80 per cent if the second crane became operational). The dredging payments would be reduced by £50,000 to £150,000. Also, the annual throughput tonnage/annual payment in respect of the Frank Cassin Wharf would be cut to 50,000 tonnes and to £50,000 respectively.

WHC balked at these proposals, saying they would make it insolvent. Maybe it will get a better deal from the new investors, but like the other creditors, it will have to take some pain. It will also have to learn that half a loaf is better than no loaf. The figures underpin that adage all too clearly. Under the examinership Bell has a net deficit of £25 million. But under a liquidation this rises to £42.3 million.

Interestingly, WHC can terminate the agreement if Bell were to go into receivership or liquidation (there is no mention of examinership). Bell accounts for around 80 per cent of WHC's trade, so at the moment, each are interdependent.

Over the longer term, such interdependency makes little sense. Bell should be free to export/import to and from where every it wishes. Equally, WHC should provide its own stevedores (Bell employs them at Waterford) and encourage trade into the port from a number of different customers.

Ironically, if the new investors represent a management buyout and if they succeed in putting a viable package together, it will be the second MBO for Bell in four years. The new investors have a marginally better chance of doing a deal because they are understood to be more flexible and there is now a greater degree of trust between the parties.

But they will undoubtedly be looking over their shoulders, at their predecessors in 1993, headed by ICG, senior management and venture capitalists who put up £400,000 in equity. This has now evaporated, as has the £9 million subordinated loan stock put up by the venture capitalists, who were also major shareholders.