The High Court has approved a scheme of arrangement with creditors of a Co Mayo cosmetics company.
Cosmetic Creations Limited (CCL), trading as Lynoslife, sought the arrangement after its revenue fell approximately 50 per cent in 2021.
The court heard the firm’s restructuring, which involves a new investor taking ownership, will ensure the retention of 60 employees at its Claremorris headquarters.
Mr Justice Brian O’Moore made orders that will see the scheme come into effect on Friday evening. He was satisfied all of the statutory requirements had been met and that this was a “fair and equitable” arrangement.
He said it was clear from the examiner’s evidence that the company has a “reasonable prospect of survival”, and approval of the proposals will allow for the continued employment of staff CCL’s sole remaining factory in Co Mayo.
The company’s revenue fell by approximately 50 per cent to €8.5 million in 2021, when it had an after-tax loss of €3.1 million compared to a profit of €2.2 million in 2020.
The court was told the firm closed its Co Cork premises, which it had purchased during an expansion phase in 2018. It also laid off staff as part of a suite of cost-cutting measures.
An interim examiner was appointed to the company in February.
Stephen Brady BL, for the examiner, said the scheme provided the company with a reasonable prospect of survival. A new investor, who is injecting €1.4 million, will take ownership of CCL and two associated companies, he said. Existing managers and shareholders will exit under the proposals.
Under the plan, unsecured creditors will be paid a 3 per cent dividend, which includes liabilities of €1.7 million to trade creditors. An unsecured claim of €4.6 million provided by about 100 pension investors will be partly novated to the new investor, while the remaining €2.7 million is treated as unsecured debt under the scheme.
Preferential creditors will receive some 7 per cent of their claim. Revenue’s debt, including €1.6 million in PAYE and €492,000 in VAT, has been classed primarily as preferential, although it will receive 100 per cent of its €228,000 debt deemed super-preferential under the plan.
CCL’s guarantee of a €4 million loan advanced to a sister company in 2018 by Invest 123 Nominees Limited falls away.
The firm’s counsel, John Lavelle BL, said the company is supportive of the arrangement, which had no objectors, and its priority is to ensure business continuity for staff and customers.
In petitioning for an interim examiner some months ago, the company said it had experienced “serious operational and financial challenges” since 2020 and into 2021.
Among the issues faced was the closure of non-essential retail outlets during extended periods, while changes to socialising and working patterns has caused a downturn in demand for CCL’s tanning and other cosmetic goods, it said.
CCL launched its own brand of sanitiser which initially resulted in a significant increase in turnover, but by late 2020 the market had become saturated and the market price reduced dramatically, it claimed.
In the years leading to 2020, the group had invested heavily in expanding its capacity to meet forecasted sales growth, it is stated. The company said it was left with excess capacity and a high-cost base that it could not sustain when revenue did not grow as expected from 2020.