Trent Concrete, which specialises in pre-cast concrete, has fallen into administrative receivership NOT administration. The latest casualty in the building sector that is feeling the pressure from uncertainty around public sector projects.
"Richard Philpott, from KPMG Restructuring, said: “The business has historically been engaged in long term contracts and its pipeline of future work has suffered from the inherent uncertainties surrounding various public sector projects. " he went on to say, “During the last 12 months it has also suffered a significant drop in turnover, leading ultimately to the cash pressures and trading difficulties faced by the business today.”
KPMG also said that they were looking to trade the company whilst in administrative receivership.
A receiver is appointed by a floating charge holder – this is typically a bank.
So what does this mean?
1.The company requires finance for its activities and borrows from a bank (or other secured lender).
2. In consideration for providing the loan the bank requires security. Normally the company will sign a debenture with a fixed and floating charge. This allows the bank security over the assets of the company.
3. If the terms of the agreement are breached or the company does not conform to the bank's wishes the charge holder can:
a) Appoint investigating accountants to ascertain how secure or not the bank's debt is and what is the best route forward (not always receivership).
b) Demand formal repayment of the loans without notice.
c) Appoint a receiver to administer and receive the company's assets in this case KPMG
4. The receiver has a duty to collect the bank's debts only, he/she is not generally concerned with the other unsecured creditors or shareholders' exposure. So unfortunately the non secured creditors are unlikely to receive anything much.
There are other options available such as a company voluntary arrangement (CVA)
Funnily enough we rescued a building company in the North East using a CVA.
For details of how this building company was rescued please read our case study; CVA Rescues Building Company in the North East