CVA Case Study Dot Com Boom

Online (Dotcom) business, way back in the Dotcom boom period of 2000. Innovative HOLDING CVA. Sales £700k.

Over £5.2m was invested by US and UK investors in an online auction system for Persian rugs/carpets and Asian art.

The MD was a great guy who knew that critical mass was still some time away and when the dotcom boom turned to dust, he saw no more capital coming in to fund the losses.
Although the losses were falling rapidly as the site began to gain following and traction. It was some 24 months from breakeven, with too many employed doing nothing. Alan was one of the first people to our CVA services in 2000!

I liked the fact that it had real growing sales and decent people. Dare I say they didn’t have their heads in the clouds!

We devised a unique HOLDING CVA neither the board nor KSA knew if sales would rise to break even, but we asked the creditors to give the company time actually 10 months, to find out.
So at a creditors meeting (no one turned up as all votes cast by post) the company was put into a CVA to find out of the company WOULD reach breakeven. This was supported by 100,000 of new money from shareholders (by begging), and approved by the Inland Revenue, VAT and landlords.

Sales needed to rise 65% over 12 months, after cost cutting, to see the company enter profit for the first time. Mind you this was not fancy EBITDA, stuff it was actual post tax profit.
Despite our best efforts, the sales rose by only 35% which was still a great performance. But we could not get it into profit. So after 10 months the CVA ended and the company went into liquidation.

Some would say this is an example of a CVA failure, I would say its actually a calculated gamble to see if a company can recover, that very nearly did work. Creditors supported it knowing that risks were small. And it was a great deal for our clients! Want to know more?

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