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Monday, 30 May 2011

Interest rates may rise soon according to BCC

Could it be the holiday month of August that the Bank of England finally decides to put up interest rates?  The British Chamber of Commerce (BCC) seems to think so.  The "temporary" high inflation seems to be lasting for longer than anticipated.  The BCC said in a report that it believes rates will go up to 0.75 per cent in August, reach 1 per cent by the end of the year and hit 2.75 per cent by the end of 2012. 
This prediction is in fact close to our own poll that showed that most of our readers expected a rate rise to 1% by the end of the year.

The fact that inflation is high is due to one simple fact - Prices around the world for essential items are going up, mainly due to higher commodity prices. What is more the demand for higher wages in the developing world is feeding through as well. 

It is our view that a rise in interest rates will push many businesses over the edge with retail and big ticket purchase businesses being hurt the most.   There are rumours in the City that a big retailer is about to fall into administration.  A few are certainly on the edge!

Inflation over the medium term will be curbed by the subsequent rise in Sterling, following an interest rise, which is one of the current aims of the Bank of England.  However, we mustn't forget that economic stability is another remit of the BOE and lets hope that any rise doesn't upset the economy too much.

Thursday, 26 May 2011

Football Creditor Rule - Is it Fair?

So, what is the "Football Creditor Rule" and is it fair?

If a Premier League football club enters into administration, or any other insolvency process such as a CVA, the club is suspended from the league until certain "football creditors" are paid in full.  This includes transfer fees and players wages.  Any remaining monies are paid to the other creditors such as HMRC and trade creditors.  Funnily enough, HMRC are not particularly happy that the wealthy footballers receive all their money whereas the tax payer gets the crumbs.  Mind you, most footballers are paying tax at 50% so they are getting something but that is not the point!  HMRC also argues that it goes against the established principal that "unsecured creditors" should all be treated equally as originally envisaged in the Insolvency Act.

HMRC are taking their argument to the High Court on the 28th of November.  Will they win?  Possibly.

The argument by the Football League and the Premier League is that they are a closed community of businesses and they have liabilities to each other (ie transfer fees) and if one can start shedding these then the knock on effects to other clubs will be to the detriment of the league as a whole.  There is some merit in this argument as the clubs do not operate like normal businesses.  Also the Leagues argue that there are further rules in their regulations that benefit HMRC ( we wont go into them here)

However,  it looks like HMRC may win as the players and managers themselves already feel embarrased that they get full pay while less well off businesses that depend on their club receive precious little if the club goes into an insolvency process.

We will keep a close watch on developments!

Wednesday, 25 May 2011

Kinsey Allen in Administration Again

Kinsey Allen, the specialist financial services recruiter, has gone into administration, following a failed pre-pack administration last year. Despite the prepack, where the previous liabilities were reduced, it still struggled on.

Recruiters have managed to reduce their overheads quickly in the current recession but the problem remains of too many recruiters chasing too few client vacancies.

What could have Kinsey Allen done to survive? Could a CVA have saved the business? The problem with a pre-pack is that it is possible that the company thought its problems were over and carried on in the same way as before that got them into trouble in the first place. It may have had to TUPE (transfer of Undertaking Protection of Employees Rights) across to the new company. Ina CVA the employee numbers can be sharply reduced with nil TUPE costs and nil cashflow impact of redundancy costs.

As a condition of the CVA, (well ours anyway), the business must produce monthly management accounts, changes to the board are often made, and a real discipline is injected into the business. Some don't survive it but that is life. Better a leaner and fitter business that can weather the storm and pays a dividend to creditors than one that fails again..

Focus DIY Stores to Close as Liquidators Expected To Be Appointed

Focus Update

The administrators at Ernst & Young have said that they have been unable to find a buyer for the remainder of the business having sold off some stores to Wickes and B&Q.  As such, they are expected to appoint specialist liquidators, Gordon Brothers, to sell the stock and then close the stores.  The stores are expected to be kept open for one month.

The resulting closure will mean about 3000 jobs are lost.

Focus DIY suffered from intense competition from Wickes and B&Q and was unable to keep going in the face of reduced consumer spending.

Tuesday, 24 May 2011

Dreamticket in Liquidation Helpline

Dreamticket has gone into liquidation.  Again, there is a very curt message on their website saying it has ceased trading and customers should contact the CAA.  No phrases like "We regret that" or "sorry to announce".  According to reports, at the time of its collapse, it had 600 customers overseas,  and 4,000 advance bookings!  The language used is in contrast to Carvill Group that  made a heatfelt statement expressing its genuine regret at not being able to continue some of its operations.. 

Customers of Dreamticket who are abroad and experiencing difficulties should call the CAA on 0044 161 444 5810.  ( Dreamticket didn't even put the phone number of the CAA up on their website ).
Customers who were due to travel at a later date should go to the CAA website for advice about refunds, or call 08444 933037

Monday, 23 May 2011

The Business Distress Index

R3, the insolvency trade body, has interviewed senior financial controllers at over 500 companies and has come up with the Business Distress Index. R3 has released some preliminary figures that suggest that businesses are starting to struggle more.  The most noteworthy observation was that 37% of businesses are worried about their crown debts!  So if more than a third of businesses are behind on their tax then there is some cause for worry.  Last time the Distress Index was published in December 2010 the biggest cause of concern by 47% of businesses was falling profits.

HMRC are tightening up on their time to pay programmes and perhaps businesses are worrying as their current deals are coming to an end.

Don't forget that as long as the business is viable in the longer term and the debt can be paid off in part over 3-5 years then a CVA may be an option.

We cannot make things in Britain anymore?

Infuriating that so many so called economists and journalists keep chanting the same mantra. Jaguar Land Rover will announce record profits for the financial year of £1.1bn. Seems that this company makes things very well. Coupled with news it is looking to invest £1bn in a new engine plant, this  highlights just how successful the UK automotive sector is.

Friday, 20 May 2011

C&G Concrete in administration

C&G Concrete, owners of three quarries and several plants in Humberside, Lincolnshire and Peterborough, has gone into administration.  The business employed 120 people and produced raw materials for the construction industry.  The administrators at PWC said it had faced "significant challenges" especially following the poor weather conditions last year.

It was placed into administration by its directors in response to an advertisement in the London Gazette publicising a petition for winding-up.  See the winding up petition notice here

I do hope that they tried to stop the petition or sought advice early.  Once the petition is advertised the company's bank accounts are usually frozen and the directors would have lost control.  The administrators would have had to seek a validation order to unfreeze the accounts so that it could continue to trade.  All this is very expensive.  Could the company have used a CVA to save the business?  Possibly, it all depends on the circumstances and the nature of the debts.

PWC have said that they have received lots of expressions of interest so are hoping to sell the business. So it must of been viable but burdened by some legacy debts.

Other divisions of the group including FH Gilman & Co are not subject to any administrators' appointment, said PwC.

Thursday, 19 May 2011

Homecall Plus in Liquidation (Update)

Homecall+ was placed into compulsory liquidation, after a winding up petition was issued against the company, has been rescued by a 21 year old female entrepreneur from Wigan. Homecall+ sells insurance to cover household emergencies such as plumbing, electrical and gas breakdowns.

Brit Insurance was underwriting the policies prior to the 3rd of December 2010 but policies which were taken out after this date remain invalid. The new company taking over Homecall+ are working with a number of underwriters to ensure policy holders can renew their policies with confidence.

Homecall+ was in the hands of the Insolvency Service, the government body that winds up companies in the public interest and all claims made prior to the company being taken over should still be made to the official receivers.

Lauren Dalton, 21 from Wigan has secured funding to buy the assets of Homecall+ and is currently meeting with underwriters, solicitors and various other companies to re-launch the company. Miss Dalton is a recent University graduate and views this opportunity of a chance to establish herself in business. Miss Dalton said "I became interested in this business when the family policy with Homecall+ became invalid and made some early enquiries. I completed some research and populated a detailed business plan to secure some capital to buy the assets of the company. I am now looking forward to the challenges ahead"

Anybody wanting to contact this company can do so by calling 01942 323435.

Property in receivership - LPA receivers explained

Receivership in respect of companies are appointed by floating charge holders where the security was created before 15 September 2003.  If the charge is created after that date a charge holder can appoint an administrator,  so they are less common these days.

However, the term receivership is still used commonly in connection to property. 

Please read our new page for more information on property receivership and fixed charge receivers

Wednesday, 18 May 2011

Liquidation rate at historic lows

There have been lots of statistics coming out recently.  The employment rate (up), the number claiming jobseekers allowance (up),  CPI Inflation up to 4.5%,  House prices (down a little).  What are we to make of it all.  However, one interesting figure to come out of the insolvency statistics has been the liquidation rate.  At just 0.75% of registered businesses this is an historic low.  Of course, more people are setting up businesses these days to try and keep themselves gainfully busy and to adapt to the uncertain job market.  But, it looks as if another reason is that the banks are less inclined to call in their debts and force an insolvency process.  In the Bank of England's Inflation Report they said that at nearly 1.5 per cent of all loans to non-financial private-sector companies, the write-off rate by the banks is at its highest since the UK emerged from the deep recession of the early nineties. Mind you for small businesses some banks are taking a tougher line. 

The banks might be being lenient but we are seeing a tougher line coming out of HMRC as they are less keen to agree time to pay arrangements and the timescales allowed to repay tax is getting shorter.  6-9 months in some cases.  Again the fact that the banks are mostly owned by the tax payers is probably a factor.  Good cop, bad cop....?

Tuesday, 17 May 2011

Wickes Owner Buys Focus DIY Stores

Northampton-based, Travis Perkins, the owner of Wickes and BSS plumbing supplies,  has bought 13 of the stores operated by Focus DIY for £8.3m, it has been reported.  Wickes said it would take on all the 345 staff at the sites it was acquiring.

Travis Perkins chief executive Geoff Cooper said: 'The acquisition of these 13 stores, cherry-picked from over 100 potential locations, further expands our Wickes business and will help us to continue our gains in like-for-like and total market share.'

Earlier, Kingfisher bought 31 stores for £23m, which will be rebranded as B&Qs.

Ernst & Young said it was in "detailed discussions with a number of interested parties" over the sale of further stores.

So, it sounds like some of the 178 stores were in good locations and perhaps making money.   Should the CVA have cut deeper in order to save the company?

Monday, 16 May 2011

Consumer Spending To Stay Subdued

According to the Ernst & Young Item Club consumer spending is expected to rise by only 2% a year in the 10 years up to 2020.
Debt repayments, low lending levels and high inflation are seen as the main drag on spending.  The effect is expected to be harshest outside London, the Item Club said. 

The ever present threat of higher interest rates is also taking its toll.  When they will actually rise is a tough call, but the weak pound is beginning to cause headaches for the MPC as most of our inflation is "imported" as a result of high commodity prices.

It goes without saying that retailers will be hardest hit by the low spending levels. There have been a few high profile collapses recently, most notably Focus DIY   However, Focus DIY had been hit by a sluggish housing market, large debts, and intense competition from B&Q and Homebase.

So how do companies plan for the next 6 months.  Well, you need to "think the unthinkable" and stress test your business, or test for "What if" scenarios.  This might be to assume the loss of a major customer.   If you are a retailer then look at wholesale prices going up 5% and customer spend falling 5%.  All this is possible.  What if your cost of capital goes up 10%? 

It pays to be prepared!  Don't forget we offer a free meeting with one of our advisors who can help you plan for difficult times.  

Sunday, 15 May 2011

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KSA Group Insolvency Notices

KSA Group Insolvency Notices

Winston Taylor Consulting Limited s98 Liquidation Notice

20:10 Design Limited s98 Liquidation Notice

MSA Restoration (UK) Limited s98 Liquidation Notice

CBW Services (UK) Limited s98 Liquidation Notice

JT Marine Engineering Services Limited s98 Liquidation Notice

Tuesday, 10 May 2011

Insolvency Figures Show Retailers and Construction Still Struggling.

Corporate insolvencies increased by 366 to 5,435 in Q1 of 2011, from 5,069 in Q1 of 2010.  These figures include all processes.  Administrations, Receiverships, creditors voluntary liquidations, compulsory liquidations, company voluntary arrangements.

 The Insolvency Service figures show that construction and wholesaling and retail were the hardest hit, which showed increases in administrations of 23 per cent and 55 per cent respectively compared to the last quarter.

Compulsory liquidations, were down 17.2 per cent on the same quarter last year but creditors voluntary liquidations showed an increase of 11.2% on the same quarter last year.

So what would this suggest?
a) There are less businesses worth saving, but more that simply need to be closed down in an orderly way.

b) Lenders are hardening their attitudes to rescues, particularly pre-pack admins

c) It is harder and harder to save businesses because of the attitude of creditors or other issues (eg increased “red tape”)

d) Companies that were give time to pay deals by HMRC have now defaulted, and either don’t want to be rescued, or haven’t got the desire to fight anymore

e) It is just a blip as the figures from the worst of the recession are now coming out.

f) All of the above, none of the above, some of the above?

In general terms the recovery has been forecast as being uneven and the statistics appear to bear this out.

Please give us your comments below?

Monday, 9 May 2011

Silentnight in prepack administration sale

Silentnight, the struggling bedmaker, has been sold to private equity business H.I.G Capital in a pre-pack administration.  Silentnight had hoped to continue trading, under the control of the directors, using the rescue mechanism the Company Voluntary Arrangment or CVA.  This would have allowed the company to pay off a proportion of its debts over an agreed time scale.

For the CVA to have been successful 75% of the creditors (by value) would have needed to support the proposal but the Pension Protection Fund indicated it would not support the rescue deal.  This was despite the HMRC, the suppliers and the employees all indicating they would vote in favour. Under the terms of the sale, the Pension Protection Fund (PPF), which is Silentnight's largest creditor, will have to take over the pension fund and its shortfall. 

Of course there is nothing stopping a company exiting a CVA via a trade sale in other situations.
Neal Mernock, chief executive of Silentnight, said: "Whilst we are disappointed that the CVA was not successful, this deal with H.I.G. Europe safeguards the jobs of our 1,250 employees and enables Silentnight to continue its proud history of manufacturing and distributing beds across the UK and Ireland."

Read our page on pension liabilities.

Thermastrate Limited Liquidation Notice

KSA Group Insolvency Notice

Thermastrate in liquidation - Meeting of creditors - The Eden Arms Hotel, Rushyford, DL17 0LL - 2nd June 2011 at 11.00 am.

See full notice below;

Friday, 6 May 2011

Cashflow problems for Recruitment

The Recruiter have published an article that Keith Steven wrote on the difficulties facing recruitment companies and how best to deal with them.  Read the main article titled Serious cashflow problems?

Despite a whole raft of issues such as falling sales, legacy debts, delayed payments, and general market conditions there are a range of solutions to help.  These might include organizing a time to pay deal, a CVA, administration, or in more difficult circumstances a liquidation.  All of these processes can help your business and in all cases the risk of personal liability is reduced.

The most important thing to do is ACT.

Thursday, 5 May 2011

Focus DIY Stores to Remain Open for 5 days

The administrators at Ernst & Young have said that they will keep the stores open for 5 days and try and sell the business as a going concern.  If no buyer can be found then the stores will most likely close.

This will be a bitter blow for the staff and the suppliers to the company. 

Reports are coming in of people going to the stores and demanding refunds for goods that they will now not receive.  Of course, if customers have paid by credit card they will get their money back.

We have blogged previously on the Focus DIY administration and will try and keep our readers up to date with events.

Voluntary Arrangement Service and CVA's

We keep getting asked the question "How come the HMRC will accept a CVA but will not accept our proposed Time to Pay proposal?

The reasons are set out in our page on the Voluntary Arrangement Service and CVAs.  Essentially HMRC Enforcement are tasked with collecting 100% of the debt.  If this is not achievable then it gets passed to a completely different department - The Voluntary Arrangement Service or VAS.

Wednesday, 4 May 2011

Focus DIY in Administration

Focus DIY, the home improvement chain with 178 stores around the country, has filed an "intention to appoint administrators" Ernst and Young.

So why has it applied to go into administration?

Well, once a "notice of intention to appoint administrators" is made then a moratorium is placed around the company that can protect it from aggressive creditors for 10 days. It is likely, in this case, that a winding up petition has been issued or threatened and it has been used as a tactic to stop the publication of the petition. If the petition was published then the bank would most certainly freeze the company's accounts and the directors would lose control.  Of course if it does go into administration the directors would lose control anyhow.  This would not be the case if they proposed a CVA however.  But it has bought them some time.

Yet again it shows that if a threat of a winding up petition is made then you have to act quickly!

The company posted a pre-tax loss of £21m on turnover down 3% to £490m for the year ending February 21 2010 according to the latest set of filed accounts.  The total debts of the company amounted to some £230m.

Again this shows the pressure some retailers are under from falling consumer spending.

If you are an employee of the Focus DIY then look at our help for employees page

*** Update - Focus DIY could go into administration by lunchtime today

Tuesday, 3 May 2011

Evans Publishing in a CVA

Evans Publishing, the educational publisher, has filed a Company Voluntary Arrangement (CVA) after recently experiencing "particularly severe cash-flow difficulties" according to a report by the The Bookseller. the leading industry magazine.
Unusually though, the company has agreed to enter the arrangement for only one year when 3-5 years is the norm as it gives the company time to pay off its debts. However this CVA is making a total dividend payment of 31p in the pound.

In December 2009, the company reported a turnover of £3.5m and a negative balance sheet of £440,000. Since then, turnover has dropped to £2.7m.

The company was established 103 years ago as a provider of resources for the education sector and the national school’s curriculum.

We have observed a number of long established companies getting into difficulties recently with Amdega, the conservatory manufacturer established 150 years ago for example.

Fall Hospital Limited Liquidation Notice

KSA Group Insolvency Notice

Fall Hospitality Limited - Meeting of Creditors - Tower 42, Level 7, 25 Old Broad Street, London, EC2N 1HN on 11 May 2011 at 10.45 am

Full notice below
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