Please visit https://www.companyrescue.co.uk/ for confidential help and insolvency advice or email keiths@ksagroup.co.uk

Friday, 28 November 2008

Woolworths - what is administration? Lots of people asking us this!

The news that Woolworth was failing has been copiously covered by the media recently and our websites have seen a sharp rise in activity in the last 3 days mainly around the word "administration".

What does it mean "go into administration", visit our website to learn more about the tool.

Interesting to see that The Guardian estimates that Deloitte will be costing £22,000 an HOUR. Top insolvency partners from Deloitte are charging £600 an hour and senior managers £400ph. So trading this business until after Christmas will see total fees charged of at least £7m assuming 8 hour days, 6 day weeks !

That's the cost of insolvency I am afraid and the other costs such as the thousands of jobs yet to be lost, £m's of creditors monies lost are still to be counted.

Monday, 24 November 2008

New CVA Case Study 27

New CVA case study published today, this is interesting for a number of reasons including, Hive Down of Assets, CVA, Winding up petition, HMRC and a very supportive bank for the rescue we led.

CVA Case Study 27

Well Managed Hardware and Software distributor £4m sales South West and London based.


Solving problems with bank funding are becoming quite common for CompanyRescue advisors and turnaround experts

At the time of writing (November 2008) we all know the big banks are under huge pressure to lend, but they also need to repair balance sheets and avoid impairment charges from future customer failure. So they are tightening up on invoice discounting and factoring rules.

This well run company was suffering from poor sales in early 2008, it sacked the sales director and recruited a new sales person, she was able to drive sales up and fill the order book, as this company has some fairly unique products supplying to (irony here) banks and stock markets! As some of the larger institutions initiated cost cutting drives they began to see sales rise.

Its invoice discounters / bank did not want to fund some of these customers thorough invoice discounting and reduced the facilities. This impacted cashflow and the directors could not meet PAYE and VAT payments. Initially they asked for a Time to Pay Programme (see our guide by clicking link.

HMRC threatened a winding up petition as the debt was rising fast, we then suggested that TTP deal was not going to assist with cost cutting, job losses and the fundamental restructuring required. So we began the CVA process and helped the board reorganise the company.

HM Revenue & Customs agreed not to issue a Winding Up Petition (WUP) but wait for the CVA plan. That did not stop a very aggressive US supplier issuing a WUP for £170,000. The advertisement of the petition would normally lead to the bank freezing the bank accounts but we knew that there was a good prospect of the CVA being approved by creditors.

KSA and the board informed the bank of the CVA plan and the WUP, yet the regional director in the South West agreed to KEEP THE BANK ACCOUNT OPEN!


This was of course, brilliant news and showed the bank truly was supportive. By working hard and arranging a quality CVA proposal the creditors approved by 80% (you need 75% of value of voters to be in favour).

The CVA saw the company's trading and assets Hived Down to 3 separate trading companies with 100% ownership by the parent company. This enabled sales to be channeled through 3 different vehicles and stopped cross security issues. By accepting the CVA the creditors also accepted the CVA Hive Down of the assets.

We prepared 4 sets of forecasts for each company and these were published to the creditors to show the new structure was viable and profitable. What was the CVA DEAL? Payment of 100p in £ of debt over 3.5 years. This is a great outcome for creditors if achieved of course.

As to the petitioning creditor, well they TOO will receive 100p though they seemed to prefer knocking the company over and getting ZERO.

Never did quite understand that bizarre logic, however after the CVA was approved the WUP hearing was held. The FD of the creditor attended the hearing perhaps to see the sword fall on the company's neck? What a shame the judge dismissed the petition summarily.

The equity of the CVA process shone brightly thorough this case. The majority wanted their debt repaid, the bank wanted to support a CVA restructure, but one strange creditor did not. Equitable outcome for all?


Want to know how to Hive Down assets for a powerful restructure of the company, talk to Keith Steven on 07974 086779 now.

Sunday, 23 November 2008

RBS lending pledge to small firms - Can we believe this?

Well that's alright then, all SME's banking with RBS or NatWest will have their overdrafts protected and see no bank charges rises for a year. All other big banks exepcted to follow according to the media.

Given we now own 60% (or so I am told) of RBS you wonder if there will be a socialist banking agenda next year or so. Will Gordon and Alistair apply the sames logic and ineptitude to RBS as they have to the wider economic problems?

"We are a government committed to tax and spend, in this global economic crisis" says Gordon "Its RIGHT to SPEND our way out of recession"....is it? Really? I don't think giving a drunk man more drink would be seen as a cure by anybody with some wit?

So why do that to an inebriated economy that has been partying for 14 years? "Here, have another, its only money"!

Getting back to the main theme here, imagine if you will, a struggling company that cannot pay the wages and salaries next month? When Mr Small Businessman goes to the bank and asks for another £50,000 overdraft will RBS be forced to lend it? No I thought not.

The fact that the cost of his non existent overdraft won't go up though, is ok. Actually its irrelevant. Most banks got rid of most SME overdrafts a long time ago, they encouraged factoring instead because in insolvency they have more security over an assigned book debt than plain vanilla overdraft security.

Isn't it amazing that Government has finally discovered the SME agenda? Can this be the same Government that announced in its last budget that it was increasing corporation tax for all companies making under £300,000pa? Oops, that'll be the same small businesses that they all of a sudden want banks to lend to?

Oh I get it, these small businesses need the cashflow to pay Corporation Tax, PAYE and VAT of course. So let's get the banks to lend to SME's coz the Government has a cashflow problem!

Mixed messages here, but seems to me we are all being taken for mugs in the SME world, we may generate 53% of GDP according to The Federation of Small Business (don't quite see how the maths works there) but my clients tell me they cannot get overdrafts, factoring, loans or banks that will even return a call!

My message to government.... stay the hell out of SME businesses, let the market work this recession out and let the poorly run, badly managed businesses out there get taken over or fail. Oh and start containing spending- not increasing it.

Will they listen? NO! They will be bribing people with tax and VAT cuts on 24th November to encourage SPENDING, but its my guess that people won't want to spend their way to oblivion, they are too worried about their jobs, houses and livelihoods. Most people I know want to save now.

So this week will be a hugely important one for the politicians and SME business alike.

Wednesday, 19 November 2008

Woolworths the next big name to fail?

Woolworths the next big name to fail?

Restructuring specialists to acquire household name for £1?

Next up to enter the Hilco clutches is the household name value retailer, Woolworths. Some followers of this blog will recall I predicted that MFI would fail when Hilco entered the fray? Well after closing most of the poor stores, MFI has been restructured, downsized and it continues as a much smaller entity. Thousands of jobs have been lost at MFI.

After divesting itself of the 2entertain distribution business and possibly dealing with a large pension black hole, Woolworths will be gobbled up for £1.

What price mass closures of Woolworth stores when rents are due 29th December, watch this space!

It’s likely that Woolworths won’t be the only big name or retail legend that bites the dust. Across the UK landlords are facing demands from their tenants for a change to the quarterly in advance method of rent payments. “Please let us pay monthly to help cashflow”, is the cry!

Well landlords may have to listen because many retailers won’t be able to meet the cashflow demands of paying rent at 29th December if Christmas is a flop… So how many empty stores will there be come dark days of January?

Tuesday, 11 November 2008

Gloomier and gloomier

Incessantly bad news seems to be the order of the day, today.

Just visit the BBC business website today, to see what I mean. The most striking headline is that Estate agents sold an average of 10.9 houses each in the last quarter. Yes fewer than one per week.

That's not enough to pay staff pay and commissions, salaries and fixed overheads. So why aren't more Estate Agents going bust? I put it down to the triumph of hope over adversity AND a decent cash balance when this crisis kicked off? The clients we have recently worked with ran out of cash sooner.

In November we have saved two professionally run companies with 7 branches each: both have slashed employment costs (with nil cash cost), both have removed management overheads, both have focused on SURVIVAL. Both have kept branches open on skeletal staffing levels.

You may recall we also rescued another multi branch firm in October?

Interestingly our client based in the South East saw October sales just ahead of our gloomy forecast and November has continued with some sizable sales made and COMPLETED. So that means that they will still be here come January.

I wonder if the many struggling small to medium groups of agencies could learn a thing or two from our clients? Why wait til the company runs out of cash, notwithstanding your legal obligation to act if the company is insolvent?

Talk to me in confidence if your agency group needs a lifeline.

Keith 07974 086779

Thursday, 6 November 2008

We are delighted to bring your more information on a recent case for KSA.

We assisted a south east based Law firm to file a company voluntary arrangement (CVA). [ http://www.companyrescue.co.uk/company-rescue/options/detailed-cva ] We believe that this is the UK’s first CVA for a Limited Liability Partnership or LLP. If you know otherwise please email me.

Case Study for a LLP
================
After a sharp downturn in business from collapsing property sales and conveyancing, the designated members (equivalent of directors in a limited company) were facing a crisis.
HMRC had been pursuing arrears of PAYE and VAT for some months and the Bank,which was Barclays in this case, had asked the well known insolvency firm,BDO Stoy Hayward [ http://www.bdo.uk.com/services/advisory/business-restructuring.html ], to look at the options.

They concluded that there was a strongly viable business but that a cash crisis was imminent. This firm looked at the options of administration [ http://www.companyrescue.co.uk/company-rescue/options/administration ]led restructuring, CVA, [ http://www.companyrescue.co.uk/company-rescue/options/detailed-cva ] trade sale and so forth for the bank and members.

Independently the designated members took advice from KSA. I believed that we could avoid administration and the serious repercussions it would bring. I was not aware but soon learned that the Solicitors Regulation Authority has the power to remove clients files and trust accounts upon granting of an administration order.

Regulation 8.2 of the Solicitors Recognised Bodies Regulations 2007, recognition of the solicitors will automatically expire if a winding-up order or administration order is granted under Part II of the Insolvency Act 1986, or a resolution is passed for voluntary winding-up, or an administrative receiver is appointed, in respect of a recognised body.

What does that mean in plain English?Well simply the firm would lose all of its clients because the Solicitors Regulation Authority would remove the legal work and clients from the company to protect their interests, upon the granting of an administration order. In lay terms a SRA hit squad would arrive and remove all of the files and take control of the trust accounts etc.

Thus the business would cease to exist as a trading entity. Even more pertinent the SRA ranks ahead of the bank’s security!!

Even with personal guarantees from designated members, an administration would have resulted in a serious shortfall for the bank and obviously the trade and tax creditors.

Whilst the various parties were conferring as to the path to follow, HMRC issued a winding up petition [ http://www.companyrescue.co.uk/company-rescue/guides/legal-actions ] with an accelerated hearing date. This gave the business only 4 weeks to propose a deal and get it accepted. We were appointed to construct the CVA deal by the designated members with the knowledge of the bank and the bank’s advisors.

I headed up the deal structuring supported by my colleague Marie Moody who dealt with the creditors issues and built the statement of affairs. We brought in one of our expert forecasters and he and I worked with the members to build a workable plan.

KSA persuaded HMRC not to advertise the winding up petition, to which they agreed providing a draft CVA was made available within 2 weeks.

The business reduced headcount and closed non performing units. Finally, a workable CVA was agreed with Barclays and filed in District Registry. HMRC agreed to stay the petition hearing until after the CVA was approved. Given it was the largest unsecured creditor, HMRC’s positive vote for the proposal led to that approval.

Its public knowledge that the enormous impact of the Credit Crunch has led to many failed estate agents, law firms and the like, this LLP is still trading today with the protection of a CVA [ http://www.companyrescue.co.uk/company-rescue/options/detailed-cva ].

Three things contributed to the success of this job:

1. The good quality information and accounting information produced by the client. We were able to collect all the data we needed within a few days of commencement. This is unusual. It’s essential to have a good management information system.

2. The support of the bank and BDO Stoy Hayward who were very keen to preserve the value of the business and work quickly towards a workable deal.

3. HMRC – the Voluntary Arrangement Service [ http://www.hmrc.gov.uk/manuals/insmanual/ins10100.htm ] was not involved with the initial winding up petition, however with their advice and involvement we were able to stop the petition advertisement and allow a short breathing space to get the CVA built.

Summary, LLP’s can propose a company voluntary arrangement that binds the unsecured creditors if approved. There is no liability for the designated members of the LLP, so they need not propose individual voluntary arrangements [ http://www.companyrescue.co.uk/partnership-rescue/options/simiva ], as would be the case in PVA or partnership voluntary arrangement.
[ http://www.companyrescue.co.uk/partnership-rescue/options/pva ]

So the very powerful CVA technique can be a useful restructuring tool for law firms which are trading as LLP’s and whilst the Solicitors Regulation Authority will keep close watch they won’t step in to remove the risk for clients and trust accounts.

Tuesday, 4 November 2008

KSA Companyrescue grows again

I am delighted to announce that Eirlys Lloyd and Stuart Nicholls have joined KSA in our head office as corporate advisors.

Stuart is a post graduate in Business coupled with many years of business experience in the leisure, holiday and hospitality sector.

Eirlys too has many years of advisory and business experience in the legal profession and after that in the hotel and small business sectors. For those like me who have not seen this name before Eirlys says her name "is Welsh and rhymes with wireless"!

Our head office advisory team has grown to 10 now. This continues our planned growth and builds more strength in depth to help our clients in these straightened times for SME companies in the UK.

I look forward to making further announcements about growth for KSA CompanyRescue in the next few weeks.

Meantime, given that all my staff HAVE to read this blog (mean or what!!) I wish Stuart and Eirlys well as they learn the ropes with their new colleagues.
Web Analytics