Printing Company Affected By The Recession

The Challenge

A print lamination company, a leader in its industry since 1993, faced a severe crisis when the 2008 recession hit its key sectors. The company’s clients drastically reduced their marketing budgets, leading to a fall in sales. While the company negotiated a Time to Pay arrangement with HMRC, the severe impact of bad debts was underestimated. In 2011, the bank withdrew its overdraft facility and the invoice finance provider aggressively reduced its prepayment rate, leading to a critical cash flow shortage. The company took drastic steps by closing three factories, making redundancies, and reducing salaries, but it was not enough to save the business.

The Solution

RMT KSA was engaged and advised against a simple administration, recommending a Company Voluntary Arrangement (CVA) instead. A CVA offered the necessary flexibility for a full restructuring while allowing the directors to remain in control and saving the company from the higher costs of administration. RMT KSA assisted the company in a comprehensive restructuring, including implementing credit insurance to protect against bad debts, further redundancies, and negotiating with landlords for rent reductions and holidays. The company also refinanced to a new invoice finance provider and began marketing its services on a national level to stabilise sales.

The Results

The CVA proposal was approved by creditors. The company’s restructuring included a “hive down” of its trading element and unencumbered assets to a new, fully owned subsidiary. This created a clean balance sheet for the trading business. The subsidiary paid a management fee to the parent company, which was then used to make contributions to the CVA supervisor and repay the bank and other finance providers. This strategic approach allowed the company to significantly cut overheads, achieve profitability, and ensure its future viability.