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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.

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.

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.

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?

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.

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.

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.

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?

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
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