Independent Business Reviews
Key Assignments 2009
Part Constructed Office Development
A Law of Property Act Receivership of a part constructed office development on the outskirts of Wigan. The property was valued in its current state at around £2million. We were appointed by a leading building society as a result of mortgage arrears following the corporate borrower entering into Administrative Receivership.
Our strategy has focused upon the completion of the development and obtaining suitable property lettings to enhance the final realisation to be achieved on a subsequent sale.
Stone Masons
An Administrative Receivership of a reputable and well established stone mason’s yard in Bradford. We initially attended a meeting with the directors and an independent third party who were interested in acquiring the business and certain assets. This interest was ultimately withdrawn, following which the company’s directors resolved that it was not possible to continue trading and requested their bank to appoint us as Administrative Receivers.
Following a short period of marketing, we completed a sale of the freehold property and the major items of plant and machinery for approximately £750,000, significantly exceeding agents forced sale valuations. Total asset recoveries exceed £1 million.
Preferential creditor claims have been settled and significant distributions have been made to the secured creditor who we anticipate will ultimately have their debt paid in full.
Precision Sheet Metal Fabrication
Administration of a precision sheet metal fabrication and light engineering company which supplied the “off-highway” heavy machinery and vehicle market with turnover in excess of £10m, employing 88 staff. The directors had made significant efforts to mitigate the severe worldwide downturn in early 2008. However, the company’s major customer withdrew all of its future requirements with virtually immediate effect in March 2009.
The company’s two remaining key customers required at least six week’s supply otherwise their own production times would grind to a halt. Thus we agreed a short term production run at increased prices whilst marketing the business, with the direct assistance of the two remaining customers.
We significantly restructured the company to trade profitably during this period.
A sale of the company’s remaining business lines was achieved after eight weeks. This included some 40% of the plant and machinery, all remaining stock at cost, significant goodwill, the transfer of all remaining employees and substantial mitigation of property related costs.
The continuation of trade allowed for the collection of the book debts, in many cases on accelerated payment terms. This approach was particularly successful and resulted in excess of 95% of the book debts been successfully collected.
The secured creditor was repaid fully and preferential creditors were paid 100p in the £.
Working closely with the company’s accountants, we additionally established that there may be a substantial Corporation Tax repayment due (as a result of a terminal loss relief claim) which may ultimately result in a dividend to unsecured creditors approaching 50p in the £.
Supplier/Installer of High Quality Stone/Marble Work
The company was a long established supplier/installer of high quality stone/marble work surfaces for both the external cladding of commercial property (the commercial market) and for domestic kitchens and bathrooms (the domestic market).
The commercial market completely dried up following the onset of the recession, but the domestic market business appeared relatively unaffected, but was not sufficient to cover the combined fixed costs of the company.
On Administration, the company was restructured and allowed to trade for a short period while exploring the interest which was expressed by several parties in its domestic business.
The business and assets of the company were subsequently sold as a going concern, preserving 14 jobs and resulting in the recovery of 98% of the debtor ledger. As a result of this continued trading and sale of the business, the secured and preferential creditors will be paid in full and it is likely that a dividend of between 5 and 8p in the £ will be paid to unsecured creditors.
Civil Engineering Business
A Company Voluntary Arrangement of an established civil engineering business based in Lancashire. The company had an annual turnover of around £4million, established contracts with numerous local authorities and employed up to 50 employees.
The proposals provided for unsecured creditors to be paid in full through contributions from profits over a period of a maximum of 5 years. This compared to a potential return of around 18p in the pound to unsecured creditors on a winding-up and cessation of trade.
The proposals were unanimously approved by unsecured creditors and supported by the company’s bankers who hold security over the company’s assets.
Since the commencement of the Arrangement the company has continued to fully comply with its terms.
London’s Largest Private Art Gallery
An Administration of one of London’s largest private art galleries which had revenues in excess of £5m per year. The company had been experiencing cash flow difficulties due to unsustainably high expenses and sales pressures caused by a steep decline in the art market. The company’s resources had also been significantly diminished due to ongoing litigation, mainly in the US. Joint Administrators were appointed to stop HM Revenue & Customs issuing a petition for the company’s winding-up.
Immediately following the appointment the Administrators’ staff worked closely with agents to review the company’s art collection and liaise with the various storage facilities that held both the company’s and extensive third party consignment stock to formulate a strategy that would enhance realisations and lower the company’s significant contingent liabilities.
In addition to this solicitors were instructed to closely review the ongoing litigation in order to ascertain whether any value could be readily extracted.
The company’s business and assets were sold within four weeks of appointment securing the jobs of the company’s employees and safeguarding the rights of the third party artists who had provided stock on consignment to the company.
After the finalisation of their review the Administrators’ solicitors successfully managed to assign the rights of the company’s actions in the US.
Guesthouse
A major bank advanced in excess of £1million to an individual who held a small portfolio of properties. Following the repeated failure to service the loans, the Bank took the decision to appoint Law of Property Act Receivers over the principal property. The property was operated by the borrower as a “halfway house” accommodation centre for various categories of individuals (placed in the main by Social Services) and with varying rights of occupancy.
Steps have been commenced on behalf of the Bank to obtain vacant possession of the property with a view to selling the property and maximising the return to the Bank.
Residential Development
A Law of Property Act Receivership of a residential development in Huddersfield comprising 24 apartments.
Given the state of the UK residential property market, we have, after consultation with our agents, concluded a sales strategy should not be commenced at present. Instead our strategy has focussed on fully letting the development on assured shorthold tenancy agreements and attempting to improve the general tenant profile over that which we inherited on appointment. This provides the appointor (a major UK bank) with significant rent yields to service the existing debt and should provide enhanced returns from a sale when the property market stabilises.
Wholesale Hardware and Ironmongery Business
A Members’ Voluntary Liquidation of a very successful wholesale hardware and ironmongery business. As a consequence of a complex tax planning exercise undertaken by the company’s and shareholders’ tax advisers, we were required to work to a very tight timescale to effect an orderly winding down of the company’s affairs, including the settlement of trading liabilities and the mitigation of creditor claims while the company was in Liquidation. This has enabled tax efficient distributions to the shareholders to date of £3.5 million, with significant further returns envisaged.
Nutritional Supplements Manufacturer and Supplier
An Administration of a nutritional supplements manufacturer and supplier. The business had suffered from a severely restricted cash flow for a considerable time prior to our appointment which had resulted in the depletion of its asset base.
Despite these constraints, a short trading period was made possible during which extensive marketing of the business took place. Five offers were received which resulted in the completion of a sale of the business and assets three weeks after the Administrators’ appointment to an unconnected party.
The sale resulted in the transfer of the majority of the employees and the granting of a license on the existing premises with the anticipation of a full lease assignment. All preferential creditors have now been paid in full and a dividend will be paid to the unsecured creditors.
Recruitment and Selection Business
A Pre-pack Administration of a Leeds and Manchester based recruitment and selection business. Immediately following our appointment, we completed the sale of the company’s business which resulted in a transfer of all 27 employees, with significant savings of preferential and unsecured employee claims. The going concern sale allowed for enhanced collections of work-in-progress and also goodwill payments, which were both achieved on deferred terms with the purchaser.
Book debt collections totalling £300,000, representing in excess of 95% of the book value of the sales ledger, were made within four months of our appointment and allowed the Bank to be repaid in full within the initial four weeks.
The company was placed into Creditors’ Voluntary Liquidation in December 2009 to enable the resulting significant surplus to be distributed to unsecured creditors.
Nursing and Residential Care Homes
An Administrative Receivership of a group of 16 leasehold nursing and residential care homes operating throughout England and Wales which employed 700 staff. Although this appointment was in 2002, we have received directions from the Court during this year on a particular aspect of this case which is of particular interest.
Following appointment in 2002, the main objective of our appointment was to safeguard the continued operations of the company’s nursing homes and to preserve any value in the leasehold properties and goodwill of the company. While continuing to trade the intention was to find a suitable party to whom an assignment of the company’s leasehold interests in the homes could be made together with a transfer of its trade.
Turnover during the receivership trading period totalled over £8million. All the leasehold premises were disposed of as operational homes which maximised recoveries and preserved employment for the majority of the workforce.
The secured creditor in this matter asserted that the company’s book debt proceeds, which totalled over £600,000 were subject to their fixed charge security created by their debentures as not only did the creditor have the right to control the receipt of the proceeds but it actively exercised that control.
Given that there was no established precedents which challenged the House of Lords ruling, we applied to Court for directions as to whether the book debt proceeds should be distributed to the debenture holder (under their fixed charge) or the preferential creditors, who were owed some £1.3million (in priority to the floating charge).
The Court examined the evidence that we had provided in relation to one of the Nursing homes (by way of example) and concluded that, in relation to the book debt collections for that particular home, the charge was a fixed charge as the debenture holder had exercised the requisite control over the receipt of the book debt proceeds.
The Court further directed that we should review similar evidence in relation to the other Nursing Homes, ascertain whether the degree of control exercised by the debenture holder was the same in respect of all the Homes and serve our determination upon all parties. Following our review, we determined that the majority of the book debt proceeds were subject to the secured creditor’s fixed charge but in certain cases, as insufficient control was exercised, some of the proceeds should be made available to the preferential creditors.
This process has resulted in a significant further distribution being paid to the secured creditor.
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