Restructuring & Turnaround Advice
Key Assignments 2008
Investment Portfolio of Both Residential and Commercial Properties
A major clearing bank advanced the sum of £6m personally to companies under the control of the individual in respect of an investment portfolio of both residential and commercial properties. After the repeated failure to service the loans the bank took the decision to appoint LPA Receivers over the 14 properties in the portfolio. Having carried out an initial valuation of the property portfolio it was apparent that due to a combination of advancing at the height of the market and over ambitious projections from previous respective advisors, the bank was likely to suffer a substantial loss. Following our appointment we have dealt with various problems in relation to false leases entered into by the property owners, resulting in substantial court action. Despite these issues and the significant contraction in this area of the property market we have managed to repay a substantial proportion of the bank’s original investment.
Brand Design and Advertising Agency
A Members’ Voluntary Liquidation of a brand design and advertising agency. Shares of the UK and US trading companies were purchased by a large global advertising corporation. Proceeds of the share sales are subject to five year earn out agreements and could total $100 million.
Development Site
Law of Property Act Receivership of what was effectively a development site near Salcombe, Devon. The property comprised a restaurant, part developed hotel and eight apartments (only five of which had planning permission). The disposal of the site was complicated by the lack of parking facilities (a 50 year lease had to be negotiated with adjacent landowners before the property could be sold) and the attempts of the former owner to frustrate any sale. Despite this, the property was sold for £0.5m more than the highest of three valuations in a rapidly deteriorating market.
Hotel
An Administration of a very well known hotel situated opposite Tintern Abbey. The hotel had been operated (illegally) by a partnership who had to be evicted and who continued to cause considerable disruption to our efforts to trade and subsequently sell the property, which was eventually achieved after the premises had been mothballed after almost a year of trading. The background to the Administration was a court case in which the partnership alleged conspiracy to defraud against one of the directors and sole shareholder, a case the partners eventually won although we understand the decision is to be appealed.
Three Charity Based, Not for Profit, Limited by Guarantee Companies
The Administrations of a group of three charity based, not for profit, limited by guarantee companies. The concept of the group was based on large areas on the edge of towns and cities where environmentally led regeneration could create new, well-wooded landscapes for work, wildlife, recreation and education, improving the health, well being and quality of life of local communities. The companies and their projects were sponsored by a partnership governed by a memorandum of agreement between local councils, agencies and the Forestry Commission.
The group had got itself into financial difficulties due to diversifying into environmentally based trading activities without adequate control over costs. It had incurred huge losses.
We completed an orderly wind down and realised the group’s book debts, work-in-progress and chattel assets. However, the group’s main assets were seven forests in various state of growth. These forests had been purchased using monies received and donated from various sources, including significant donations under the Landfill Tax Regulations. The forests were also subject to various covenants, liens, S106 agreements, to the extent that the directors attributed a nil value to the forests in their Statement of Affairs. After much investigation, we marketed the forests over several months and subsequently negotiated an offer approaching £300k.
Before we could complete the sale, the Regulator of the Landfill Tax Regulations challenged our ability to sell the forests, despite having previously agreed that we could, on the basis that they were purchased by “donations”. We obtained a Court Order confirming our ability to sell the forests. However, this Court Order was challenged further and ultimately led to the Regulator taking their case to the Court of Appeal.
The Court of Appeal dismissed the appeal and thus we are able to complete the sale of the forests as agreed. We were also awarded costs on an indemnity basis. The Court also ordered that the sale proceeds were made available to the creditors and not to the previous donators.
Suppliers of Large Pneumatics and Compressors
An Administration of a national supplier of large pneumatics and compressors, along with compressor servicing, with an annual turnover of circa £12m. The group had suffered severe cash flow issues for a significant period before our involvement and its operations were in a very stressed state. In the 10 days before our appointment, we marketed the group’s businesses to specifically targeted interested parties. Best offers were requested from four interested parties, and immediately following our appointment, we completed the sale of the compressed air line of the business as a going concern.
We continued trading and marketing the remaining lines of the business in the Administration, and achieved two further separate going concern sales.
Goodwill in excess of £300,000 was achieved from these going concern sales, together with enhanced stock and plant and machinery realisations.
An additional positive aspect of these going concern sales was that it allowed for book debt collections in excess of £2m some £1/2m more than anticipated. The substantial book debt and goodwill realisations enabled us to settle the secured and preferential creditors in full and there will be a distribution to unsecured creditors.
High Quality Carpet Wholesale and Importer
An Administration of a high quality carpet wholesale and importer. The company’s stock holding at Administration enabled us to trade the company for a short period which enabled the market to be explored for a potential sale of the business and assets while also selling a proportion of the stock for above “forced sale” values. Although a sale of the business was not possible, realisations to date have enabled full repayment to secured creditors with the prospect that preferential creditors are also likely to be paid in full.
Recruitment
A Company Voluntary Arrangement of a company which was shackled by historic liabilities to HM Revenue & Customs and was seeking time to stabilise its finances and pay creditors in full. The agreed terms of the Arrangement state that the company intends to pay all creditors in full within a 3 year period by way of contributions from ongoing trade and resulting profits. The company is continuing to comply with the terms of the scheme and has been able to focus on dealing with current challenges posed by the general economic downturn.
Large Plant Hire Company
An Administration of a large plant hire company, specialising in heavy plant, including construction plant and access platforms. The company operated from its head office in Winchester, together with four other Southern region branches. In excess of 95% of the company’s assets were subject to finance agreements with over thirty separate finance companies. There were also seven secured creditors with fixed and floating charge debentures, whose complex rankings over the various asset categories were covered by a deed of priority.
After securing funding for staff salaries, which allowed us to trade the company until the end of the month (10 days), a buyer was identified and a going concern sale of the business was completed realising significant goodwill. Book debt collections approaching £1m have also been achieved exceeding the expectations of the invoice discount financier.
High Quality Italian Meats and Cheese
An Administration of a company that supplied high quality Italian meats and cheese imported from Italy. The company was the sole UK distributor of Negroni products via a distribution agreement with Pietro Negroni SRL. The agreement proved increasingly uncompetitive and unprofitable and the directors attempted repeatedly to renegotiate the terms of the contract. When it became clear that Pietro Negroni would not alter the terms of the agreement the directors, foreseeing continued trading losses, applied for an Administration Order. Upon appointment we took advantage of the company’s substantial prepayments in respect of rent, wages and other fixed costs and decided to trade the business to sell the high perishable stock levels and protect the debtor book of approximately £450K. Over a three week trading period we managed to sell the entire stock which resulted in a trading surplus of £108,000. During the period of Administration approximately 75% of the debtor book was collected. The company has now passed into Liquidation and an estimated dividend of 30p in the £ will be paid to unsecured creditors.
Estate Agency
A pre-pack Administration of a long established estate agency whose trading activities also included lettings, auctions and property management. Immediately following our appointment, we completed the sale of part of the business which resulted in a transfer of two thirds of the employees, with significant savings of preferential and unsecured employee creditor claims. Marketing of the remaining business line ultimately resulted in the sale of the housing stocks not transferred with the business sale. In addition, we have managed the disposal of two out of three freehold properties, significantly reducing the bank’s exposure.
Chain of Women’s Clothing
Administration of a chain of women’s clothing shops, operating from 30 boutique stores and concessions throughout England. Several parties had expressed interest in the business following our marketing. Ultimately, the business proved impossible to sell due to concerns over the declining retail market and general economic downturn. We therefore undertook a structured closure of the outlets to maximise stock realisations and mitigate liabilities.
Facilities for the Hairdressing and Beauty Treatment Business
Administration of a company that provided the provision of facilities for the hairdressing and beauty treatment business operating from several leasehold premises in the Yorkshire area. We were contacted following the company’s decision to appeal against a HM Revenue & Customs decision to force the company to be compulsorily registered for VAT. The only real assets to realise were various leasehold interests held in its name. We continued to liaise with chattel agents and the company’s solicitors realising significant funds enabling the company to move into Liquidation in order to facilitate a significant dividend to unsecured creditors.
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