CVA case study - UK based motor dealerThe director of the company contacted Keith Steven of KSA to discuss the company’s present financial situation. Then, after a subsequent telephone conversation with KSA regional manager Hugh Gabriel, a meeting was requested and held at the company’s premises in May 2014.
The company operates within the motor trade sector and provides used car sales and servicing. KSA were appointed to assist the company with a Company Voluntary Arrangement (CVA) in May 2014. Turnover for the previous year, was c£5.4m.
The company was encountering financial difficulties due to:
- The critical downturn in sales/falling turnover
- A highly competitive environment
- The company operates from leased premises including workshop, showroom and display forecourt.
- The company now employs 14 staff including the director.
- During cost reduction and restructuring of the company as part of the CVA process it was necessary to make several redundancies
Bank & Financial facilities
- There is one secured creditor with a fixed & floating charge in respect of a long term loan facility
- The bank is unsecured and provides no loan or overdraft facilities.
- The company has various finance agreements which are to be maintained through the CVA term.
- The director had provided Personal Guarantees (P.G’s) to several creditors including some of the finance agreements which are to be maintined.
Unsecured Creditor debt:
- £612K of which HMRC is 73%
Cost & overhead reduction
- prior to KSA's appointment, the director had been attempting to reduces costs. This continued during the CAV production process with the negotiation of restructured payments and payment holidays with some facilities. The redundancies detailed above will have a ripples effect on associated cost. Other overheads such as in effectual marketing and promotion has been cut.
The nominee’s review was held and the CVA and nominee’s report were subsequently lodged at court in December 2014. The CVA proposed 41p in £1 repayment to unsecured creditors over 5 years.
HMRC provided their response initially rejecting the CVA. the creditors' meeting convened for early January 2015 was adjourned while the points raised were addressed, to which HMRC responded with an acceptance of the CVA. The CVA was approved by the body of creditors at the adjourned creditors meeting.