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Pre Pack Administration Process and Procedures
Pre pack administration is an insolvency procedure which allows an insolvent company to sell its assets to a buyer before appointing administrators. It’s a powerful, legal way of selling the business on to a trade buyer or third party.
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Pre-pack administration for Victoria Plum
Intro Victoria Plum, one of the UK's largest online bathroom retailers, has been snapped up in a pre-pack administration deal (undisclosed amount) by AHK Designs. This came following being put up for sale by owner, Endless.Endless, the private equity firm, acquired the online retailer in 2019 and saw three years of profitable growth. However, most recently cashflow and profitability had been impacted from rising freight costs and a slowdown in consumer spending with many shoppers cutting back from online shopping. With this in mind, it was thought Victoria Plum would benefit from being part of a larger group, which owned complementary businesses in order to continue to develop.So now AHK Designs, the e-commerce retailer that also owns Beds.co.uk and furniture seller, Cox & Cox will take on the brand. It's 300+ sized workforce will be transferred over.Ernst & Young are handling the deal and confirmed the sale that took place on Friday afternoon; ''The joint administrators [Samuel James Woodward and Timothy Graham Vance] completed a sale of the business and certain assets of the company to AHK Designs LTD.''Aamir Khurshid, from AHK Designs, said: "Victoria Plum is a leading online retailer of bathroom products with a strong brand and market-leading product. We are pleased to be investing in the future of the business and look forward to welcoming all of Victoria Plum's employees into AHK Designs."
ReadHotter Shoes in Administration Threat
19th July 2023Hotter Shoes has been rescued by natural knitwear brand WoolOvers in a pre-pack administration deal. The sale will see all 421 employees as well as 27 stores and concessions transferred to the privately owned fashion brand.11th July 2023Hotter shoes in administration threat according to reports. Please see this story for the latest.13 November 2020This morning we hear that Hotter Shoes, Britain's biggest shoemaker, is to be put up for sale. Electra Private Equtity appointed investment bank, Stifel, to run an auction on the company during the course of next year, once more normal trading conditions can be resumed.This comes just a few months after its CVA was given the green light. This emergency restructuring plan cut many jobs and reduced its store portfolio.31 July 2020Hotter Shoes can move forward with its plans to permanently close 46 stores since its company voluntary arrangement (CVA) proposal received the green light from creditors.The company's owner, Electra Private Equity PLC, of whom launched the CVA proposal, announced that the proposal was accepted by 99.5 per cent of voting creditors.This will bring its total store portfolio from 61 to 15. There will be a number of redundancies too, but it is reported that at least 350 jobs have been saved.CEO of the footwear retailer, Ian Watson said: “I would like to thank my colleagues for their support and understanding through this process. Following the impact of Covid-19 the CVA was a regrettable but necessary step to avoid the likelihood of Hotter going into administration causing a much larger number of job losses, and was critical to ensure a viable future for the business. Now, we can focus on accelerating the implementation of our strategy to develop the respected and valuable Hotter brand with a greater emphasis on its online offering, which should establish a successful long-term future for the business."10 July 2020It is reported that shoe retailer, Hotter, has submitted its CVA proposal to creditors and shareholders, seeking approval for the closure of 46 stores.This submission is to help the footwear retailer avoid collapsing into administration. It would see Hotter's store portfolio fall from 61 to just 15 stores. Rental payment terms would also be adjusted for its remaining sites.It is expected for 350 jobs to be saved from the proposal, if approved, though some redundancies will be unavoidable.Creditors have until the 28 July to vote on the proposals, with a virtual shareholders meeting scheduled for 29 July.If approved, the completion date of the CVA is 1 March, 2021.Ian Watson, CEO of Hotter, explains how these steps are necessary to ensure the long-term success and survival of the business.22 June 2020Shoe retailer, Hotter, prepare to launch a Company Voluntary Arrangement (CVA) as it looks to scale down rapidly, as part of a restructuring plan.Electra Private Equity, its parent company, said the management had been in discussion with its retail landlords to seek agreement to reduce the number of stores to a more viable level and cost. However, discussions had been unsuccessful in reaching the agreement needed to allow the retailer to continue.If the CVA process, which will be entered in the coming days, is approved and successful it will reduce its trading stores to 15, from its current 80.A formal consultation process has been launched with former employees of its Skelmersdale head office, informing them a number of redundancies is likely.‘’The need for these actions has been intensified by the consequences of the past three months of lockdown. If successful, the proposed CVA will result in fewer stores, which will secure the future of a smaller, sustainable business and will save over 350 jobs.’’ – Neil Johnson, Electra chairman.Just earlier this year, Claire Pearl was appointed as chief product officer, to give the business a more ‘’stylish and modern’’ feel, for its 60th anniversary this year. Before the pandemic hit, Hotter was doing well and progressing with accelerating its digitisation strategy to return to its direct marketing routes.
ReadPrincess of Wales’s parents’ party supplies firm sold after insolvency fears
Update 8th JuneA report by the administrators has been filed and Party Pieces was £2.59million short of what it needed to pay off its long list of debts. The company, which had only 12 employees at the time of its administration, owed £612,685 in tax.The business of the parents of the Princess of Wales, Carole and Michael Middleton has been sold to entrepreneur James Sinclair, after failing to avert a collapse into administration.Party Pieces Holdings, the online party goods supplier, was launched by the Middletons in 1987. It was founded when seeking inspiration for daughter Kate's fifth birthday. The idea was to organise imaginative children's parties - later expanding into selling party decorations, tablewear and personalised gifts.A pre-pack administration was said to be used for the sale, on an undisclosed sum. According to insiders, the preferred option was to have the business sold with a dowry and avert insolvency, but this was not possible. Interpath Advisory is the appointed administrator.According to information circulated to potential bidders, Party Pieces had shown "some recent UK performance contraction during international expansion and focus on margins". Trading is said to have been severely impacted by the pandemic and the company is reported to have made losses in the last financial year for which accounts have been filed.Sky News reports more.
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What is an administration sale?
When a business goes into administration one often hears about the administrators putting a business on the market as they try and sell the business. This is mainly because the administrators are charged with getting the maximum return for creditors as quickly as possible.
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KSA Group Saves 25 jobs after pre-packaged administration sale
Eric Walls and Wayne Harrison are delighted to announce the sale of a 40 year old flexographic packaging and printing company in the Norfolk area. The business had been trading well, with sales of over £3m per annum, until the sudden loss of a major contract. The directors sought advice from our insolvency practitioners, and it was agreed that, regrettably, the company was no longer viable.Having considered all options available to the company with its directors, it was decided that a sale of the business and assets to a non-connected trade buyer was the most appropriate solution.Our team was advised by Roger Cutting of Charterfields who conducted the marketing of the business and assisted with the sale process. After a short period of marketing the business and assets including goodwill, intellectual property, stock and equipment were sold to a trade buyer in the same industry, which was not connected to the company or its directors.Eric Walls said “overall we are pleased with the sale, as we believe it achieved a better result for creditors due to the highly skilled jobs which were saved, and the novation of certain finance agreements where there was either no equity or modest equity available in the major pieces of plant & machinery concerned. We always look to the best option available, and in this particular case speed was of the essence, resulting in the use of the pre-packaged administration process”.Contact Eric Walls on insolvency@ksagroup.co.uk or call 0191 4823343
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What is a Phoenix Company And Are They Legal?
A phoenix company is a new company that rises "from the ashes" of a previously insolvent company It is achieved by having the assets and goodwill of the company being transferred to a new company under the same set of directors. The process is completely legal as long as the assets are fairly valued.
ReadThe Death of Pre Pack Administration to Connected Directors & Shareholders?
New laws regarding Pre Pack Administrations come in April 2021. It mainly governs the process where the sale is made to a connected party. An evaluator will be required to approve the transaction.
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Advantages and Disadvantages of Pre Pack Administration
When is a Pre Pack Administration the best option? A pre pack is usually the best option if there is a good underlying business and there is an imminent threat of a creditor taking drastic action like a winding up petition or indeed a cut off of supplies/services which would damage the value and trust in the business. The essential element is finance - someone, usually a third party or connected party such as the current directors, has to be willing and capable of getting finance to buy the business. This insolvency procedure is more common for larger businesses as it is quite expensive and complex.Pre pack administration is a viable business solution, but as with any venture it comes with its advantages and disadvantages... Advantages of pre pack administrationThe business continues to operate with no interruptions or destroyed value. Once the plan is ready and a contract of purchase is drawn up, the company is quickly protected by the court. This allows the administrator to sell the "business and assets". Debts can be written off. The process is quick. If everything is in place then a company can be "pre packed" in a day. Higher returns for creditors. If the company's assets are sold with no interruption of business then a higher price is achieved. This means there is more money for creditors than if the business went into liquidation. The costs are lower. The process is cheaper than trading administration as administrators do not need to find funding to fund trade the business Directors can keep some control over the business. If the company is sold to people already familiar with how the business is to run, increases its chances of success. Lessons can be learnt to understand where the business failedDisadvantages of pre pack administrationThe process can generate negative publicity. The directors can be seen to shed liabilities and then carry on as if nothing has happened. Unsecured creditors think they have no say in the process and feel they’ve lost disproportionately Company may be sold to a competitor. A competitor is often the most likely buyer as they know the business and will see it as an opportunity to expand. Loss or control by the directors as new funders/private equity may insist their removal Tupe rules apply. Job contracts have to be carried over into the 'newco' under TUPE rules so you cannot shed staff to reduce costs in the "newco" The "newco" will need to be funded. If the business is to be sold to a connected party (e.g. the former directors), they will need to fund the acquisition of the assets. These will need to be independently valued to avoid any issues. It is best to consult a specialist funder to help with this part of the process HMRC are likely to demand a VAT security deposit. If there is a substantial HMRC debt then HMRC may demand a deposit from the "newco" before they are allowed to register for VAT, as once bitten twice shy! Remember that the business was already insolvent prior to any appointment/reaching an agreement. Any transaction to the existing directors or a connected third party need to be "evaluated" which adds time and cost.
ReadPre pack pool: How does it work and how much does it cost?
From 2nd November 2015, there have been changes to the way pre-pack administrations cases are handled. When there is a planned sale of a business to a connected party, the case can be referred to the pre pack pool for a review via an online portal. While it is optional to apply, Insolvency practitioners must advise those involved of the pre pack pool, as stated in the revised Statement of Insolvency Practice 16 (SIP 16).Visit the pre pack pool website here: https://www.prepackpool.co.uk The aim of the pool is provide better transparency for creditors who will receive an independent opinion of the sale. This will state whether the case is ‘unreasonable’ or not. Creditors and suppliers will hopefully feel more confident with the new ownership and the business going forward.The Department of Business, Innovation and Skills has now revealed who the members of the pool are. The membership is as follows:David Abbott, MSc, FCA, AMCT David Blair, MA, FCA, MBA, CF Paddy Campbell, FCA Dr. Simon Chapman, C Dir Colin Coghlan, C Dir,FloD, MBA Philip Gardner, BA (Hons), FCA, Cdir, DipM Rodney Hare, FCA Len Jones, BA (Hons), FCA, MBA, MSc Philip Long, FCA Kevin C Mouatt, C Dir Jon Newell, FCA David Newman, C Dir, MBA Philip Oatley, FCA, BA (Hons) Tim Rose, C Dir, MBA Alec Sanderson, BA, C Dir, FBCS, CEng Tony Sanderson, FCA, BA (Econ) Philip Walter, BSc (Hons), CDir, FCMI Tony Wilkinson, FCMA Simon L Willis, C Dir, BScThe service will cost £950 + VAT. For more information and to apply, visit: https://www.prepackpool.co.uk
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Statement of Insolvency Practice 16 | SIP 16
The statement of insolvency practice (SIP 16) is produced by the Insolvency Practitioners Association to regulate the use of pre pack administrations
ReadBonmarche Shops may be sold in a pre pack administration
update 2nd of December 2020Sun 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 Bonmarché 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 administration at the same time. If this does happen the staff contracts will still be transferred across to the new company.
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