A provisional liquidator was appointed to Money Markets International (MMI) Stockbrokers Limited at the High Court yesterday. Mr Justice Peter Kelly was told the company has liabilities of about £14 million.

A petition to wind up the company, supported by the Central Bank, was adjourned to March 15th. Mr Justice Kelly appointed Dublin accountant Mr Tom Kavanagh as provisional liquidator.

Mr Kavanagh was given powers to take immediate possession of the assets of the company and liberty to carry on business, to borrow up to £40,000 and to collect debts.

The court was told the London Stock Exchange wished to issue a statement yesterday stating MMI of Lower Baggot Street, Dublin had ceased to trade. In an affidavit read by Mr Hugh Mohan BL, Mr Robert Holt of Lewis Road, Scanes Hill, West Sussex, a director of MMI, said the London exchange statement would cause a flurry of activity on the part of MMI's clients and creditors.

Mr Holt said that in order to protect the interests of MMI clients and creditors it was necessary for an independent appointed official to be in place to deal with queries as they arose.

The London exchange had also emphasised the importance of maintaining MMI's current staff in situ as the exchange's procedures would need to be implemented immediately with the assistance of MMI staff. Mr Holt said the company traded profitably until August 1998 when it began to encounter financial problems which were "inextricably linked to the manner in which the company conducted its business". The company engaged in a variety of stockbroking businesses including "considerable margin trading activity", which would typically involve a client providing the company with about 25 per cent of the value of the stock the client wished to acquire.

The company would then contract to acquire the stock and find ways to finance the stock for forward delivery. In September 1998 a fall in stock markets occurred. This caused stock values to fall by more than the 25 per cent margin provided by MMI clients and MMI was forced to turn to its clients for payment but found many were unable to pay.

Mr Holt said the failure of MMI clients to pay up had eroded the company's capital base and in September 1998 the Central Bank suspended the company from dealing. When the company's clients refused to pay, its liabilities exceeded its assets.

K&H Options Ltd, a British registered company was, and remained, a substantial creditor of MMI, being owed about £8 million. In view of its large exposure K&H Options decided MMI was worth rescuing.

Factoralter Ltd, the principal shareholder in MMI, was owned by four of the five shareholders in K&H Options. K&H entered into negotiations with MMI and came up with a rescue package which required an injection by K&H of £2.3 million out of K&H's funds, together with a standby bank facility from certain of MMI's then directors.

Mr Holt said a standstill agreement was entered into between MMI and certain of its major creditors on December 2nd, 1998, and Factoralter took over MMI by acquiring 100 per cent of its share capital.

MMI, having received the £2.3 million injection, was then in a position to make good the deficiency in the client funds and to provide working capital. The Central Bank removed its suspension. MMI began collecting debts due to it.

Last month, Mr Tim Murphy, MMI's managing director, had resigned, leaving only Mr Holt, the part-time chairman, to take charge. Mr Holt co-opted Mr Philip Kitchener as a director.

MMI sought to draw on the standby facility to have been provided by former MMI directors, but it transpired this facility had not been put in place.

Mr Holt said the general level of business being conducted by MMI since December was lower than expected and, in addition, the debtors which were MMI's principal and virtually only assets had failed to pay and this had precipitated a cash crisis.

The directors had been unable to source further funds and had recommended to shareholders that MMI be wound up. Liabilities were about £14 million and MMI's principal asset was its debtors. Mr Holt said MMI had about 5,000 clients and the vast majority were small private investors. Many clients could not pay the debts owed and one client had gone into liquidation, leaving the £800,000 owed to MMI unrecoverable.

Other clients were refusing to pay debts due by them and had informed MMI of their intention to institute proceedings against MMI.

Mr Holt said the shareholders had passed a resolution to petition the High Court for a winding up order.

The presence of the existing MMI staff would be required for the orderly winding up of MMI.