The High Court has appointed an interim examiner to Dublin firm International Securities Trading Corporation (ISTC), which lends capital to banks. The court was told ISTC is insolvent due to events caused by the crisis in the financial markets.
The alternative to examinership would involve liquidation and a "fire sale" of ISTC's assets, leading to a shortfall of €871 million, Mr Justice Peter Kelly noted yesterday. He said the application for court protection resulted from ISTC becoming a victim of the volatility in the financial markets in very recent times.
Its problems arose from the recent downgrading of Structured Investment Vehicles (SIVs) and consequent demands for repayment of those SIV assets which ISTC had procured on the basis that it had had "to borrow short and invest long".
Because of the recent market turmoil, SIV repayment demands had been made and it was unable to meet those demands, the judge said. The structuring of its other assets and a default mechanism had led to further demands in other areas and it was unable to pay its debts.
An independent accountant had prepared a report suggesting that if certain conditions were met, the company or part of it had a reasonable prospect of survival, the judge noted.
These included agreement with enough secured creditors to continue trading with ISTC, the company being able to cap its exposure to collateral calls by secured lenders, and the approval of an appropriate scheme of arrangement. The judge appointed John McStay as interim examiner to the company. He noted Mr McStay had had 400 shares in ISTC, described as "valueless", but had disposed of those.
He listed the hearing of the petition for examinership on December 17th and directed that the petition be advertised in newspapers here and in the Financial Times and Wall Street Journal.
Michael Collins SC, with Rossa Fanning BL, for ISTC, said earlier that the directors believe, provided certain conditions are met, that the company, or part of it, has a reasonable prospect of survival.
Some creditors were prepared to explore restructuring, he said. The company's assets were illiquid in even the best market conditions and, given the current market crisis, there was a "commercial imperative" to deal with ISTC to avoid having a "fire sale" with bonds either not being sold at all or being sold in a very depressed market.
The application for examinership came after an ISTC board meeting yesterday afternoon and following a warning issued on November 23rd last by a German bank creditor that it would file a petition to wind up ISTC within three weeks, unless its debt of €176,000 was paid.
ISTC's directors include Tiarnan O'Mahoney, former chief operating officer of Anglo Irish bank; Frank Gaynor, Auburn Grove, Malahide, Co Dublin; Roy Barrett, The Hill, Monkstown, Co Dublin, Raymond JR French of Kirk Michael, Isle of Man and Paul Somers of Carrickmines Avenue, Dublin.
