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Friday, 2 July 2010

CVA Case Study Restructure of a leveraged Buy Out

KSA was invited to review this marketing and print management company with circa £8.9m of sales.

"We have a failing company whose investors have invested £1m, plus £7m of loans and loan notes. HMRC is threatening to wind up the company for unpaid VAT and PAYE".

So started a conversation with a distressed company director with Keith Steven. After 20 minutes we established the following position.

1. The company had a turnover of £4.4m in the last 6 months. Its had previous year sales of £8.9m.

2. Trade creditors amount to c£506,000.

3. Inland Revenue was owed c£834,893 for PAYE and NIC, various time to pay (TTP) deals had been agreed and reneged upon owing to cashflow pressures.

4. VAT was owed approximately £45,000.

5. Investors funded the MBO that formed the group holding company. Investors had provided loan notes of £5.3m, interest has been accruing and interest stood at £738,365. Directors/shareholders had provided a further £808,000 of loans and interest was accruing as above.

6. The Bank was owed £550,000 on a term loan. It also provides an overdraft of £150,000 to the Group Holding Company. Currently the bank overdraft was standing at £216,000 (nominally).The bank held a debenture with a fixed and floating charge on all monies due from both companies on a charge created 17th November 2006.

Invoice discounting was provided by the same bank. The current facility provided for 85% initial payment. Overall the facility provides an advance of £1.091m. The debtor book was currently £1.329m.

Read the case study here

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