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Friday, 27 January 2012

Pre Pack Administrations To Remain In Current Form

The long awaited government review into pre pack administrations has come to an end and Ed Davey, the minister responsible, announced that they are not going to reform them as they were "not convinced" that the changes would benefit the position for creditors.  The main change mooted was to give the creditors a 3 day window, during which they could be consulted on the process.  The insolvency industry believed that this would mean that the value of any business would be quickly eroded and the most forceful creditor could negotiate better terms by withholding supplies for instance.  On the other side creditors with legitimate reasons to want to be more involved in the process and perhaps launch a bid for the company felt that 3 days was simply not enough time to get themselves organised.  Both cases are most likely true so it was a non starter really.

The Insolvency Service said that it would look at ways that the process could be made more transparent and it is there that there may be room for improvement.  SIP 16 statements can sometimes be quite cryptic and do not always convince creditors that the company was sold for best value.

Thursday, 26 January 2012

Thamesteel in administration

Thamesteel, the Kent-based steel producer, is in administration today and Mazars have been appointed as administrators.   The plant has a turnover of £100m and its plant is in Sheerness. The company can produce more than 800,000 tonnes of steel billet a year and produces other steel long products such as wire road and bar.  These products are mainly used in construction and there has been a slowdown in the demand in the UK and Europe.  No statement has been released yet by the company or its administrators.

The 400 workers are expected to be updated today on the future of the plant.

Thamesteel was bought by Saudi Arabian company Al-Tuwairqi Group in 2002.

If you are an employee of the business then please take a look at our pages on your rights as an employee of a business in administration.

Wednesday, 25 January 2012

GDP falls in Q4 by 0.2%

It wasn't a huge surprise, but GDP fell by 0.2% in the last quarter of the year.  However, analysts expected a fall of just 0.1% so it does increase the likelihood of the UK falling into a recession, defined as 2 quarters of negative growth.  This will put pressure on the Bank of England to increase the measures to stimulate the economy known as quantative easing.  The coalition will also be facing pressure to find ways to stimulate growth.

Experian also announced that the number of corporate insolvencies rose in 2011 when compared to 2010. Experian said there were 21,070 corporate insolvencies in the U.K. in 2011, up from 19,818 in 2010. The proportion of the total business population failing (the insolvency rate) rose slightly up to 1.1% from 1.03%, Experian said.  This does need to be taken in context as an insolvency rate of just over 1% is historically very low compared to the nearer 2.5% in the early 90s.

Prior to Q4 insolvencies were actually down but it does go to show what an impact the Euro crisis has had on sentiment and consumer confidence.  The austerity programme as well is beginning to be felt.

Tuesday, 24 January 2012

Petroplus Refinery in Administration Talks

The Zurich based owners of Petroplus have announced that they are looking to put their UK based operations into administration after the failure of discussions with their bankers.  The refinery Coryton refinery in Essex - which supplies 20% of fuel in London and the South East may shut down and 1000 jobs will be at risk.   There only eight refineries in the UK - at South Killingholme, Fawley near Southampton, Grangemouth, Stanlow, Milford Haven, Lindsey in north Lincolnshire and Pembroke, as well as Coryton.

The closure of the refinery could mean supply problems across the South East but the public are warned to not panic buy petrol as this will just make the situation worse as local supplies get out of Sync.

A refinery is unlikely to be shut down permanently but a buyer should be found to restart supplies.  The company has announced its "intention to appoint" so no formal insolvency procedure has started yet.  The shares in Petroplus fell 87% today.

Hawkins Bazaar Sold to Management

The remaining 8 shops of Hawkins Bazaar have been bought by management a month after the business went into administration.  The chain had 65 stores nationwide but Zolfo Cooper closed 57 of them and made 300 people redundant.

The management have been backed by private equity group Primary Capital and they have taken over the website and trading name of the company.

A few years back Hawkins Bazaar had a successful online business but they expanded into the High Street in search of more customers.  Maybe the new management will look to reinvigorate the online brand?

Monday, 23 January 2012

Telwise Limited Liquidation Notice

KSA Group Insolvency Notice

Meeting of the Creditors of the above named Company will be held at The Westmead Hotel, Redditch Road, Hopwood, Birmingham, B48 7AL on 2 February 2012 at 2.15 pm for the purposes mentioned in Section 99 to 101 of the said Act.

For full notice see below

Swansea City FC saved by a CVA 9 years ago.

Swansea City has been in the news recently as they beat Arsenal in the Premier League 3-2.  Quite an achievement when you consider that, exactly 9 years ago, they were bottom and Arsenal were top of the entire 92-team football league.  What also happened 9 years ago was the club went into a CVA or more commonly called a company voluntary arrangement.  The total debts of the club amounted to £1.7m a huge amount for a small club at the time.  The CVA was approved by 92% of the creditors.  Prior to the CVA it looked like the club would go into liquidation.

The club was sold to a group of local businessmen who set about changing the management and supporting the club with their own money.  The CVA was the only way to give the club a breathing space for its debts.  But as can be seen a CVA will only work if the management are prepared to change or new owners take over the running of the business.

If you think a business is in the "bottom league" and you think that you could buy it and then save the business and aim for the "premier league" by, in the first instance, putting it into a CVA then talk to us.  We are always happy to advise on acquisitions.

Friday, 20 January 2012

George White in Administration

George White, one of the largest motorcycle dealerships, has gone into administration it has been confirmed today.  The administrators are Richard Hawes and Robin Allen, of accountants Deloitte.  61 redundancies have been made.  The company was established 50 years ago and had a turnover of £25m.  Its main site was in Swindon but it also had sites in Bolton, Donnington, Plymouth and Slough.

Making employees redundant is always difficult in any circumstances.  However, sometimes job cuts are the only thing that can save a business and stop it going into administration or liquidation where more jobs are lost.  Many directors worry that  if their business is struggling they cannot actually afford to make redundancies as it would hit cashflow harder.  It is important to understand that employees who are made redundant in the event of insolvency are entitled to compensation from the government.  The claim is up to £400 pw of statutory redundancy.   Compensation is triggered by a "qualifying insolvency event"  This actually includes a company voluntary arrangement (CVA) as well as administration or liquidation.  This is an important benefit of the CVA mechanism.  A CVA is not as public an insolvency event as administration or liquidation and it will give the business a fighting chance of survival.  But you need to face up to the problems early and take advice.

With so many retailers going into administration these last couple of weeks one cannot help thinking that perhaps some of them could have been saved earlier.

Thursday, 19 January 2012

Pumpkin Patch in Administration

In yet another retail failure, Pumpkin Patch, the New Zealand retailer with 36 stores in the UK,  has appointed  Deloitte as administrators for the UK operations.  The retailer employs 400 staff in the UK but it has a much bigger operation in Australia and New Zealand.  However, the UK shops were loss making and the company announced that it was putting the UK operations into administration. The shops sold high quality children's clothes and accessories.

Deloitte said the company had "suffered as a result of the unprecedented and prolonged downturn being experienced in the UK retail sector"

However it is hoped that the business will be sold out of administration

Retailers are getting hammered by the slowdown in consumer spending and it would appear to be "survival of the less weak" at the moment.

If you are a struggling retailer then read our retailer rescue pages to see how you can determine lease obligations and save cash to survive.

Peacocks in administration

Following on from our blog of Tuesday about Peacocks, the company has been put into administration as no buyer could be found quickly.  However, the administrators at KPMG have said that they are trading the business for the time being and that there had been much interest in the chain.

The Peacocks business operates about 611 stores and 49 concessions across Wales, Northern Ireland, Scotland, and England and employs approximately 9,600.

The irony is that the majority of the 600 stores are trading "profitably" but it is the huge debt overhang from the management buyout in 2006 that has been the company's undoing.  The company also saw an INCREASE in sales of 16% in the last year.  It is expected that the head office staff will see the first redundancies while the administrator tries to slim down the business.  At the end of the day the banks are beginning to call in their huge loans as they start cutting their exposures.  Could this be the corporate credit crunch?

If you are an employee of Peacocks then please read this page on your rights as an employee of an insolvent company

Wednesday, 18 January 2012

Bond Partners LLP Administration, Complaint Over CVA Supervisor Fees

Received a call today, following up our blog on Monday about Bond Partners LLP. I was informed that a company in a CVA that paid £180,000 contributions into a CVA in its first 12 months had been appalled that creditors received nothing in return. The CVA Supervisors fees taken ?

I am informed that the fees taken were £180,000. If this is to be believed, and the company concerned is taking legal advice, this is astonishing.

This company had had £480k of debts and around 45 creditors, so a normal supervisors fee in year one would be no more than £5-6,000 from £180k of contributions.

What is also interesting is there is very little news coverage on this failure of a mid sized insolvency firm?

Cookie Man in administration

Cookie Man, based in Esher, has entered administration according to the local newspapers.  It is expected that redundancies will need to be made but the administrators at ReSolve Partners LLP have said that they wish to continue trading the company while a buyer is found.  The firm employs 350 people.

The Cookie Man, based in Mill Road, is a factory which produces bread, pastries and biscuits.

We will update our readers when we know more.

Tuesday, 17 January 2012

Directors of Sangs and Calanike speak out about administration

The directors of Sangs and Calanike, who have seen their companies put into administration this week, have spoken out about the actions of Allied Irish Bank (AIB).  Sangs, the drinks manufacturer, and Calanike, the petrol retailer, who between them employ over 300 people, claim that AIB put them into administration without warning.  In fact they claim that they have not defaulted on any of their loans and are in profit.  In the case of Calanike the firm has over £5m in assets and reported a profit of £192k.

So what has happened?  Well, the lender has the right to call in its loan at anytime and given that AIB is in a perilous situation themselves this seems to be what has happened.  The benefit to the bank of not calling in the loan is that they can charge interest on the loan and make a profit.  However, if they want all their money back suddenly they have the power to appoint an administrator to secure their position.

Both firms are taking legal advice but the small print on such loans does usually say "payable on demand" and the courts have upheld that if you cannot pay "on demand" then you have technically defaulted.

Monday, 16 January 2012

Peacocks close to administration

update: 17th January

Both Peacocks and Bonmarche have filed intention to appoint administrators which basically gives them 10 days to sell the business.

Peacocks have been trying to sell the Bonmarche stores in their portfolio as they struggle to stave off administration but according to reports, the Royal Bank of Scotland is reluctant to keep the company going. 

Peacocks owe the banks some £240m, with RBS being the lender most exposed with 17% of the debt.  However, it has been mooted that the overall debts could be much higher.  Talks on saving the business have been going on over the weekend and KPMG has been lined up as the administrators if the talks fail. 

Peacocks has been struggling against competition from the likes of Primark.

High Street names may be worried as RBS is the major lender for a number of well known brands such as HMV and Clinton Cards who are all currently struggling in the economic climate. 

Where a firm owes a significant amount of money to the bank they are in a vulnerable position as the bank, who is a secured creditor, has the power to appoint administrators.

Peacocks has over 550  stores and employs over 10,000 people so this would be the most significant company collapse since Christmas.

In better news Barratts, the shoe retailer, has been rescued in a deal that has saved 1100 jobs but 680 jobs have been lost.

Friday, 13 January 2012

KSA Group is top flight CVA advisory firm

In a study of all the CVAs filed in 2011 KSA Group were the supervisors on 6.5% of the total number.  Given that this market includes all the major firms such as KPMG this is a very good performance.

Obviously, the total number does not give the whole picture in that some CVAs are for small companies and some for very large.  KSA Group has proposed CVAs for companies with turnovers ranging from £300k to £15m.  KPMG got the two biggest appointments, Blacks Leisure and JJB Sports.  But many of the other firms hardly feature at all in the statistics.  Is this because rescue is not seen as the first option or is perceived as not likely to work?

Many insolvency practitioners do not mention a CVA to their clients as they don't like the idea of the directors being in control of the business that is in difficulty.  However, if the directors can stop creditor pressure and get on with running the business then it can succeed.  JJB Sports is still continuing despite the economic slowdown.

Thursday, 12 January 2012

Retailers' results being punished by the markets

Tesco has reported a 2.3% fall in sales over Christmas, which is in stark contrast to Sainsbury's that saw a record Christmas.  The markets have punished this performance by Tesco which has seen its shares fall by 14% in early trading.  Other retailers that have disappointed the markets are Halfords, Argos, Thorntons, Mothercare and Homebase whose sales have fallen by around 2-4% in the run up to Christmas.  However, other companies seem to have done quite well recently.  Is there a market shift going on?  Majestic Wines, Sainsbury's, JD Sports, Ocado, Debenhams and Marks and Spencer have all performed well.  Shoppers have definitely changed their habits but those companies that can move fast to new markets or predict shoppers future behaviour are set to still perform well. 

Little Chef, who has announced that it is going to cut its sites by a third, is an old established brand that has changed little over the years.   It now seems to be facing up to the reality of the changing market.

Wednesday, 11 January 2012

Bonmarche Shops may be sold in a pre pack administration

update 23rd January

Sun European Partners said Monday in a statement that one of its funds had acquired and will keep open 230 Bonmarche stores - part of a broader asset portfolio of Peacocks assets and will close around 160 stores.

We blogged back in September 2011 that the lenders to Peacocks had appointed KPMG to review the business as the firm had some £240m of debts and was in danger of breaching its covenants.

It has been reported that the company is under pressure to sell its 360 strong chain of Bonmarche shops to help repay some of the debt.  Bonmarche has been put up for sale in the past without success.  It is understood that a number of buyers are now interested and these include Hilco, the restructuring specialists, and the Edinburgh Woollen Mill.

Peacocks acquired BonmarchĂ© in 2002 for £55m, which has 360 shops and 4000 staff.  It is expected that the sale could fetch £10-£15m.

It has been suggested that the chain could be sold in a pre pack administration whereby the assets of the old company is moved across to a new one (newco) and the "oldco" is put into admistration at the same time.  If this does happen the staff contracts will still be transferred across to the new company.

Past Times Administration? - Not yet

Past Times, the beleagured gifts chain, has not yet gone into administration as the High Court has granted it an extension of a further 10 days to do a deal before it has to formally appoint administrators.   What has happened is that last minute talks with a potential buyer are being conducted and the Court believes there is a reasonable chance of a deal.

The notice to appoint an administrator is an important tactic in rescuing a company.  Although it is a public event it stops creditors actions such as winding up petitions for a period of upto 10 days.  In this time the company has to either appoint administrators or be sold off whole or in parts in order to pay back creditors.

It is very much a director and their advisors led procedure.  When a business suddenly goes into administration what has usually happened is that a secured creditor, such as the bank, appoint administrators which they have the ability to do in order to protect their position.

Tuesday, 10 January 2012

KSA Group Insolvency Notices

Larkin Consultancy Limited

Meeting of the Creditors of the above named Company will be held at the offices of KSA Group Ltd, Tower 42, Level 7, 25 Old Broad Street, London, EC2N 1HN on 19 January 2012 at 2.15 pm

Full notice below Limited

Meeting of the Creditors of the above named Company will be held at the offices of KSA Group Ltd, Tower 42, Level 7, 25 Old Broad Street, London, EC2N 1HN on 19 January 2012 at 11.00 am

Full notice below

Appetite Limited

Meeting of the Creditors of the above named Company will be held at the offices of KSA Group Ltd, Tower 42, Level 7, 25 Old Broad Street, London, EC2N 1HN on 30 January 2012 at 11.00 am

Full notice below

Monday, 9 January 2012

What is a phoenix company?

With the prospect of more companies failing over the next year the term "phoenix company" may be become more commonplace.  This is where a new unencumbered company rises from the ashes of the old indebted company to carry on the business. 

Some feel the practice is allowing directors to escape debts too easily and others say it is a natural recycling of failed businesses....

Please see our new page outlining the phoenix process along with some of the pitfalls to be aware of.

Can HMV Survive?

HMV are still holding on despite reporting a terrible fall in like for like sales over Christmas of 8.1%.  But with overall sales down 16.6%. New revamped and reformatted stores are doing well and this might be the only thing that is persuading their banks to keep the company going for now.  Alternatively, they may be waiting for the sale of their live music business.  Either way HMV in their interim statement said that;

"The economic environment and trading circumstances create material uncertainties which may cast doubt on the Group’s ability to continue as a going concern in the future, and these uncertainties continue."

Director's disqualification after company wound up by HMRC

We received a call today from someone whose company ceased trading and was wound up by HMRC with debts of £100k.  HMRC has now initiated disqualification proceedings which may result in the DBIS disqualifing the director for 4 years.

Allowing the company to be wound up by HMRC for a large debt and hoping that is the end of it is not a good idea.  If you are disqualified as a director you can also be prevented from having a controlling stake in a business.  In the event that you breach this then you may be liable to criminal proceedings.

The best option is to go for a creditors voluntary liquidation as this brings an orderly close to the business.  The liquidator will still have to report on the directors conduct but if you have done nothing wrong then you should not worry and it will give you an opportunity to start again.

Small Businesses Key to Recovery

In an excellent article in City AM, Xavier Rolet has pointed out the obvious truth.  Big successful businesses started small and in order to have sustainable jobs and growth small businesses need to be nurtured and unfettered.  Consider the numbers, there are 4.8m SMEs in the UK and for each of these companies to generate one job would be easier than  FTSE 100 companies adding 48,000 each...! His angle is mainly to call for tax breaks for investing in companies and that is understandable given his position as CEO of the Stock Exchange Group. 

What he would like to see is minority investors getting more incentives to invest and their investments being more easily traded.  AIM has been successful and UK Aim listed companies have contributed £12bn to the GDP.

From a non investing side, businesses owners need to be encouraged to create jobs and lowering the cost of employment is an obvious one.  The payroll tax in the US has been scaled back to 4.2% and many people believe this has helped generate jobs.

Access to new forms of finance are currently replacing some bank lending, albiet at a cost, but the flow of finance is crucial to growth wherever it comes from - Equity investment or lending.

Friday, 6 January 2012

Blacks Leisure in Administration

Blacks Leisure, the camping and outdoor wear store group, which announced a profit warning ahead of the Christmas trading period, has announced that it is to go into administration with KPMG lined up as the administrators.  The firms shares have been suspended having fallen 97% in the last 12 months.  The company said that it is expecting to sell most of its assets in the next few days.  As such any sale is being done through the administration process.  It is a pre pack administration of sorts in that a buyer is ready to buy.  Normally a full sale and administration are done at the same time in a pre pack.

The administration will allow the firm to write off its £36m debts, and help it to close down loss-making parts of the business.

Any buyer is expected to require the closure of, or job losses at, Blacks' head office and warehouse in Northampton

Blacks Leisure came close to going into administration in 2009 which saw it closing over 100 stores by using a company voluntary arrangement to restructure and rescue the business. Although no panacea, the CVA bought time for the company but ultimately management has failed to turn it around.

If you are a worried employee of Blacks then please read our pages on redundant employee.  However, please do not call our office as we can only point you to our website.

If you are supplier to Blacks take a look at the advice we give for suppliers and how they should supply a company that is going into administration

Thursday, 5 January 2012

How can I get an adjournment of a winding up petition?

The court, which has the power to grant the winding up order, also has the power to grant an adjournment of the hearing at which the petition is presented.

An adjournment may be granted if the court can be persuaded that the company needs more time to come up with the money or that the amount of the debt is disputed. It may be that the company can come up with all the money owed at a later date, an example of this maybe the sale of a valuable asset such as a property is currently on the market so the money is not immediately available. However, if the debt is in dispute, and this can be proven, then the court has the power to dismiss the application. 

Please read our new page on adjourning a winding up petition

Wednesday, 4 January 2012

Scottish insolvencies likely to increase in 2012

A recent report by PKF has predicted that a total of 25 Scottish businesses a week will become insolvent in 2012.  This represents about 1300 Scottish companies. 

Although, if you look at the statistics from 2010 and 2011 then this figure is much in line with previous years.  However, The latest published quarter of 2011, Q3, shows that 361 companies in Scotland became insolvent, the highest recorded and a 46.2% increase compared with the third quarter of 2010.  So it looks as if 2012 will be difficult year.

Take a look at our Scottish Company Rescue pages to see how we are different from many Insolvency practitioners in Scotland, in that we advocate the use of the Company Voluntary Arrangement as a primary way of rescuing companies.  Yes, it does apply in Scotland although there are not Individual Voluntary Arrangements or IVAs in Scotland but Trust Deeds.

Talk to our man in Scotland, Derek Robinson.  You can call him on 0131 242 0081 if you have any worries about your business.

Tuesday, 3 January 2012

Darlington FC in administration

A consortium of businessmen in Darlington have failed to buy the town's football club before its current owner, Mr Raj Singh, placed it into administration.  It had been reported that a last ditch attempt was made to save the club.

The club has previously fallen into administration in 2003/4. Mr Singh the chairman had been investing some £80,000 every month to keep the club running, the players went unpaid in December.  Mr Singh issued a statement in it he said ""I know I can leave the club knowing that I tried everything I possibly could to make Darlington FC work."

However, the consortium of investors may be able to buy the club out of administration to take it forward.


What will 2012 hold?

2011 was to many people a year to forget. The Royal Wedding wasn't enough to bring back the feel good factor. The economy has slipped back from some growth earlier in the year and a string of retailers failed to make it past Christmas. More are expected to follow. Employment issues are still hurting lots of people, including the young.

I, however, do not share all the gloom and pessimism that is out there for three main reasons.

1. The Queens’ Diamond Jubilee
2. The London 2012 Olympics and Paralympics
3. Manufacturing growth in automotive, aerospace and Hi Tech

The London Olympics; these are huge events on the world stage with the UK putting on a  world class show, it is a  great shop window for UK plc.

Jaguar Land Rover has announced that it is going to have to increase capacity to meet the strong demand for its cars especially the exciting Evoque model. Thousands of new jobs are expected to be created over the next few years. JLR has already announced 8,000 new jobs in the last 15 months. Across the automotive sector significant new investment has been announced and new jobs are on the way at Honda, Nissan, Toyota and BMW (Mini). A recent survey of hi tech manufacturing saw more than two thirds stated they will be growing and taking on more people.

We lead the world in many hi tech sectors and growth is expected in many of these.
Of  course, the pessimists will say that such optimism will be swamped by the Euro zone which may collapse and will contract and therefore harm our prospects. Once the euro politicos make a REAL decision about a controlled break-up of the Euro, with Greece the first to leave it, then uncertainty will reduce over time. Uncertainty holds back investment. I do see a risk that the Euro has a disorderly collapse, that would be frightening for many. However, UK is sitting outside and can control its own destiny to a greater extent.

I see growth returning after half way 2012, we may skirt with recession in the next few months however. I see growth back on trend in 2013 as investment multipliers kick in and hopefully Euro uncertainty is mitigated.

Lack of lending to small businesses may still be holding back growth but a number of new and dynamic entrants into the funding market will hopefully see a more ready supply of credit.  On the flip side expect to see growth in insolvencies of heavily indebted companies that have had their debt "extended and pretended" by the banks.

Rising growth and asset values could lead to banks to believe they can knock these zombie companies down and get money back from the process of asset realisation.

Hawkin's Bazaar is an example of a hugely indebted business. With £46m of debts which are largely unsecured. The banks and PE houses will take a hit on that company’s debts, but I gather that cash was so short wages and rents were not going to be met easily. Many more zombies will fail but thousands of smaller SMEs are surviving without bank debts. Increasing numbers of new entrants into this market include Crowd Funding companies, new banks like Metro Bank will provide some of these companies with finance if they need it to grow.

2012 will see KSA Group continue to grow its business by promoting the use of  rescue tools such as the CVA which can help viable businesses avoid insolvency.  CVAs are still underused in the market place and we aim to educate business leaders and their advisors on its many advantages and help debunk some of the myths. We are also increasingly using informal debt restructuring especially in the legal sector and for other professional firms. This "plan A" approach is based on the CVA, but avoids formal insolvency and is carefully structured and supported by very detailed modelling of the business.

Finally, I guess a lot of the above will turn out to be wrong! But I wish all readers a happy and prosperous 2012.

Keith Steven KSA Group
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