Marine Hydraulics Sector Suffering Following Failed Product Launch

The Challenge

A company specialising in marine hydraulics began experiencing severe cash flow problems in late 2013. The situation was triggered by a series of events: the acquisition of two smaller companies, a failed product launch, and a number of bad debts. This financial distress culminated in HMRC issuing a winding-up petition in July 2015, which had to be paid using funds from associated creditors to avoid immediate liquidation. Despite the company cutting staff and other costs, it was clear that substantial restructuring was required to save the business.

The Solution

The company, which had a strong customer base including top-100 global firms, sought assistance from RMT KSA. It was recommended to explore a Company Voluntary Arrangement (CVA) as the best path forward. RMT KSA took on the responsibility of handling creditor communications, which relieved the directors of immense pressure. As part of the restructuring, the company reduced its staff count and vacated premises that were no longer necessary. An associated creditor agreed to convert their debt into preference shares, providing further financial relief.

The Results

The CVA was a success, with more than 100 creditors approving the proposal. The CVA offered a return of 35p in the pound, an outcome that was accepted by the creditors, including HMRC. This process allowed the company to restructure, shed its unsustainable overheads, and resolve its debt issues. The directors are now confident that they can successfully trade through the CVA and return the company to profitability.