Case study Southern based furniture company

29 August 2014

This company was incorporated in May 2012 and is a supplier and installer of kitchens, bedrooms and bathrooms. An employee of the company contacted Sarah Massey of KSA to discuss the company’s present financial situation. After a further telephone conversation with Gary Weber of KSA, a meeting was requested and held at the company’s office in April 2014.


KSA were appointed to assist the company in late April 2014 on a ‘Plan A, Plan B’ basis: 


Plan A – KSA would broker an informal Time To Pay (TTP) deal between the company and its major creditors. The benefits being that: 
- The creditors are paid in full
- Pressure is removed from the company’s cashflow while directors seek to introduce new working capital 
- Avoid an official insolvency mechanism.


Plan B – a full CVA to all the company’s historic creditors


Turnover for 7 months to 28th February 2014, was c£600K. The company was encountering financial difficulties due to:
- Being undercapitalised 
- Maintaining an expensive loan facility. 
- Downturn in the market and trading conditions.


Premises
- The company operates from leased premises, incorporating large showrooms


Employees:
- The company employed 5 staff including directors 


Bank & Financial facilities
- 1 short term loan facility which was secured by debenture – fixed and floating charge.
- The company had an overdraft facility of £25K which was at the limit
- The company had no other facilities with the bank


Directors
- The director’s had provided Personal Guarantees (P.G’s) in respect of the overdraft and short term loan. 


Unsecured Creditor debt:
- £132K of which HMRC was only 4%


Many sources of additional working capital were explored to no avail. Lenders were reluctant to commit due to little in the way of unencumbered assets to provide security. Several threats of Winding Up Petitions were received.


KSA Regional Manager, Gary Weber, met again with the directors in early June 2014 and it was decided that the company was not viable. KSA provided the directors with proposals for a CVL (Creditors Voluntary Liquidation) however there was no further response and KSA had no alternative but to write to the company and creditors explaining that it had now resigned from assisting the company.

Categories: Liquidation, Creditors Voluntary Liquidation CVL