Independent Business Reviews
Key Assignments 2010
Printers
Two Administrations of reputable luxury printing businesses which collectively held three Royal Warrants following a merger in 2008, with a combined annual turnover of £3 million.
Whilst the business of one company had merged into the other leaving it dormant the trading company retained the two distinct historic trading styles and thus generated two separate income streams.
The proposed increases in sales and cost savings from the merger did not materialise and these coupled with management disputes and reduced bank funding gave rise to losses and severe cash flow restriction.
Whilst management had sought advice from numerous recovery specialists leading up to the Administration no definitive plan was able to be agreed upon between stakeholders.
After liaising with management Geoffrey Martin & Co instructed agents to market the businesses for sale whilst similarly liaising with the main secured creditor to discuss ongoing funding to allow trade to continue.
One buyer was identified quickly; however they only required one of the businesses and its respective staff. Whilst subsequent to this a further buyer was found for the residual business, their offer fell through at the last moment. Due to cash flow pressures Geoffrey Martin & Co sought appointment as Administrators over both companies to enable the sale of one of the businesses, which was concluded immediately upon appointment. An acceptable offer was eventually received for the remaining business and a sale concluded days later. Spread over three sale agreements both deals were complicated by the fact that the assets of the companies had to be scheduled in great detail to avoid confusion over future ownership, agreements for shared occupation over rented premises and leased assets also had to be agreed upon and finalised. The finalised deals ensured the survival of these historic trading styles and the preservation of all employees’ jobs.
The Administrations are still ongoing, however to date all preferential claims have been settled and it is envisaged that the secured creditor will be discharged in full.
Golf Course
A trading Administration of a historic 18 hole golf club established in 1889. The original course was designed by Donald Steel with the current course measuring 5,567 yards with a PAR/SSS of 68. The club latterly had a turnover in the region of £615,000.
The controlling director was forced to resign earlier in the year and the remaining senior directors were of ill health. These factors along with the fact that the Club had embarked upon developing and refurbishing the clubhouse building along with substantial ongoing planning and development projects led to an unsustainable trading position. After meeting with the directors we were subsequently appointed as Administrators.
After a review of the business it was apparent that it would be necessary to continue trading the Club to safeguard the position for the Club Members, creditors and also to provide the opportunity for interested parties to view the business and assets of a live golf club.
At the commencement of trading there were 21 employees operating in the areas of the golf course, pro shop, members’ bar, restaurant and office. The trading position was continually reviewed and over the following months it became necessary to close some of the loss making facilities and reduce staff levels. The business is continuing to trade at a much reduced level.
The business and assets were advertised which resulted in a high level of interest and several offers being received. An offer from a consortium was received and accepted as being the best offer in respect of the outcome for creditors. If the offer had been successful the creditors would have been paid in full and the company would have been passed back to a new Board of Directors to continue trading the business. This offer failed to complete and negotiations are now continuing with other interested parties.
The expected outcome will be dependent on a successful sale of the business and assets.
Vehicle Hire Business
A pre-packaged Administration of a large vehicle hire business in the West Midlands. The company employed 37 staff and operated approximately 500 vehicles in the short-term domestic and commercial vehicle hire and municipal vehicle hire sectors.
The company had purchased the businesses as part of a management buyout four months earlier. Despite having a new directorship, maintaining annualised turnover of £8 million and ongoing support from suppliers and financiers, the company was unable to secure sufficient finance facilities to meet its cashflow requirements.
The directors sought interested parties to invest in the company and identified a primary investor. However, as negotiations progressed it was determined that due to the company’s likely insolvent financial position its business would have to be sold through an insolvency process. Accordingly, the directors contacted us to advise the company and implement an appropriate approach.
After conducting an analysis of the company’s financial position and conducting a brief marketing campaign of the business, a contract for the sale of the company’s municipal vehicle hire business was negotiated and executed immediately upon the Administrators’ appointment. Subsequent to the Administrators’ appointment the short-term domestic and commercial vehicle hire business was also sold.
The purchaser of the company’s business was engaged to assist with the collection of the company’s book debts of £2.4 million. This process proved successful with collections anticipated at upwards of 80%; improving the collection of the company’s debts through the provision of ongoing services and minimal interruption to customers’ businesses.
The secured creditor was paid in full from strong debtor collections within six weeks of the Administrators’ appointment. Additionally, supportive financiers novated their vehicle finance agreements to the two purchasers, maintaining substantially all of their outstanding finance arrangements. Most employees were retained by the purchasers and the few preferential employee entitlement claims that were made have been paid in full. Unsecured creditors are expected to receive between 25 and 35p in the £.
Equine Semen Distributor
A Compulsory Liquidation of a supplier of frozen equine semen. The winding up petition was presented by a well known German concern specializing in show jumping and dressage disciplines.
All stock was housed in frozen storage and it had to be quickly established if the stock belonged to the company or to individual third parties before a sale of stock could commence. It was necessary to ascertain specialist valuers in order that the stock could be properly valued based on named stallion demand and to ensure that correct import certification was in place.
Due to a defined breeding season and the disappointing demand for this stock it is unlikely there will be any funds available to pay to the creditors.
GT Racing Team
An Administration of an established GT Racing Team which had raced with some success in the British GT Championship and in the Le Mans Series but had failed to attract sufficient sponsorship to commence the 2010 season.
A marketing campaign for the sale of the business as a going concern was undertaken but was handicapped by the timing of the commencement of the 2010 race calendar as most teams had already acquired everything needed to compete. Despite not being able to locate a purchaser for the business, a number of valuable assets were able to be sold, realising approximately £200,000 in order to maximise value for secured creditors.
The case involved a significant amount of asset tracing and marketing of valuable racing technology.
Supplier/Installer of Stone and Marble Work Surfaces
The company was an established fabricator and installer of quality stone / marble work surfaces for the domestic kitchen market in the North East of England.
The company had invested significantly in up to date technology, but suffered like many others as a result of the change in market conditions throughout 2009 and early 2010. The decline in the levels of turnover was too severe to enable it to continue.
The company was restructured immediately on Administration and allowed to trade for a short period whilst we explored interest expressed by several parties in its business.
Unfortunately, despite the interest expressed no offers were forthcoming. Accordingly, the strategy was modified and the Administrators supervised an orderly wind down of the business to maximise realisations of debtors, stock and work-in-progress. This resulted in two of the three secured creditors recovering all or a substantial part of their debt and preferential creditors being paid in full.
Independent Residential Property Developer
The company operated in the North East of England in the real estate market, building bespoke residential developments, over a number of years.
The engagement initially involved the firm in an advisory role, assisting the company outside of any formal insolvency procedure, with a view to completing the outstanding works on its current development to maximise realisations and minimise the directors’ guarantee position. However, due to the continued difficulties in the residential property market the company experienced significant cashflow problems, and the resultant creditor pressure led the directors to seek the protection of Administration.
Working closely with the secured creditor, the Administrators have formulated a plan to complete the development site and dispose of the other remaining properties at the most opportune times. It is envisaged that because of the Administration strategy being adopted, the secured creditor will recover a substantial part of its lending, thereby mitigating a significant proportion of the guarantors’ liabilities.
Residential Development, Hexham, Northumberland
A Law of Property Act Receivership of the freehold land and buildings, together with the leaseholds of 10 unsold apartments, of a 21 apartment high quality residential development in a good location in Hexham, Northumberland. The appointment was made to take control of the development because of a lack of management leading to very substantial mortgage arrears by the corporate borrower.
Our detailed initial review of the development has also highlighted the opportunity to improve the leases previously granted by the borrower and realise unsold car parking and garage facilities, which alone could ultimately realise additional income of well in excess of £100,000.
We have formalised a property management function for the development and undertaken a much needed freshening up of the property; both operations having been neglected by the borrower prior to our appointment.
We have, after consultation with the Bank and our agents, concluded a sales strategy should not be commenced at present. Our strategy has focussed on letting the unsold apartments on assured shorthold tenancy agreements and seeking to improve their investment value. This will provide rent yields to service the existing debt and is aimed at providing enhanced returns when the property market stabilises.
Property Portfolio, North East of England
A Law of Property Act Receivership of five investment properties in the north-east of England. The appointment was made as a result of the repeated failure to service the loans by the partnership borrower.
The portfolio includes a substantial Victorian grade II listed building located in Newcastle city centre and an office block in South Shields, Tyne & Wear. The properties all provide mixed accommodation with varying combinations of retail, commercial, office and residential. All properties are tenanted to varying degrees.
We have stabilised the property management functions of all five individual properties and have commenced feasibility studies with a view to maximising the return to the Bank.
We have, after consultation with the Bank and our agents, concluded individual “initial” realisation strategies for each of the five properties. Our strategies have focussed primarily on maintaining and increasing lettings / tenancies / leases / rentals and undertaking refurbishments to varying degrees; with the aim of improving the investment values of the individual properties. This will provide the appointor with rent yields to contribute to the servicing of the existing debt and is aimed at providing enhanced returns when the property market stabilises.
Poultry Farms and Processor
The Administration of a chicken growing and processing business, specifically “poussin” chickens, based in Cheshire. The company employed 92 staff, operating four farms and facilitating seven other third party farms to grow chickens, which were processed at the company’s own plant under EU regulations and Halal law conditions. In the region of 100,000 birds were processed weekly and were sold direct to major supermarkets, high street stores and the Halal market.
The company had increasingly experienced a loss of turnover in the Halal market and suffered low and fluctuating market prices of chicken.
At the time of our appointment, the company had a stock of almost 400,000 live birds and in excess of 200,000 frozen poussin. The company’s key customers were contacted immediately following our appointment, which resulted in the implementation of a six to eight week trading plan coinciding with the “chick cycle” of the business.
The trading period allowed for an extensive marketing campaign to sell the business as a going-concern, which resulted in a significant number of interested parties coming forward. Unfortunately, a sale of the business was not achieved, due primarily to perceived restrictive terms of occupation of the company’s main trading premises.
The continuation of trade allowed for the collection of book debts, in some cases on accelerated payment terms, enhanced stock realisations of the birds processed and sold fresh and significant frozen stocks sales. The company’s plant and machinery and vehicle fleet were advertised for auction, but were sold by private treaty in advance of the auction to one of the parties who had expressed an interest in the business as a going concern.
The preferential creditors have been paid 100p in the £ and the floating charge creditor will receive a substantial repayment; interim repayments having been made to date, as and when funds have permitted.
Farbio Sports Cars Limited
A successful Company Voluntary Arrangement of a sports car manufacturer and designer based in Bath.
The company had built up a significant order book for their prototype, the Farbio GTS, but a lack of funding as a result of the banking crisis, resulted in production and further development coming to a halt. The company faced an immediate threat of liquidation, following receipt of a winding-up petition. Creditors totalled over £2 million, comprising secured creditors of around £450,000, management and associated parties with unsecured debts of over £1 million and deposit creditors of some £400,000.
The company’s proposals provided for a significant contribution to be made from an independent sports car manufacturer in consideration for equity in the company. This contribution provided the only opportunity for unsecured creditors to receive a dividend distribution, and also provided the prospect of the company receiving the on-going funding it required to enable trading and development to continue.
Mike Osborne Developments Limited
Law of Property Act Receiverships of a portfolio of 14 buy-to-let properties and land situated throughout the North West of England (owned either by the Company or a related partnership business). The appointments were made by a leading High Street Bank.
The tenant profile comprises a combination of HMO and private tenancies with lease and option to purchase agreements entered into by the borrowers prior to appointment. Many of the properties have their own individual problems, and disposing of these properties in the current climate is proving to be challenging.
The properties are valued at a total of some £1.4 million, and disposals are ongoing.
Paragon Roofing and Asphalte Limited
A Liquidation of a long established and reputable roofing contractor based in Yorkshire. The company employed some 20 staff and had an annual turnover in excess of £2 million. We had been providing insolvency advice to the board of directors for some time prior to appointment and had initially been advising in relation to a proposed CVA. Ultimately, and following various meetings with stakeholders, the directors concluded they could not formulate meaningful proposals to creditors for a voluntary arrangement which led to the company’s liquidation.
The realisable value of the Company’s assets was estimated to total over £250,000. It is anticipated that the company’s preferential creditors shall be paid in full and a significant distribution shall be made to the company’s secured creditor.