Engineering and Design Group of Companies Rescued by RMT KSA

An important cog in the design and manufacturing processes of vehicles, earth moving equipment, cars, boats and trucks with businesses across UK, Europe, USA and China was recently helped by our expert turnaround and recovery teams at RMT KSA (formerly KSA Group).

We worked with the boards of two UK companies and their international owners over a 7 month period. The following is a summary of the creative approach taken.

Company A: Historic sales of £12-13m, with strong profitability.  

Along with an uncertain marketplace, Company A had incurred a serious bad debt of £1.25m from an EV manufacturer who became insolvent – the debt is unlikely to be recovered. Insurers were dragging their heels on paying out on 33% bad debt cover.

The Company employed 65 people, with two UK rented properties. Property rent was postponed whilst our work was completed, a time to pay arrangement was agreed with the landlord over 12 months.

HMRC owed £900k plus a few small trade creditors.

Secured creditor was owed £530k receivables advance on the bad debt referred to above.

The board was optimistic about future prospects with a good order book ahead. International clients in Asia, USA and EU.

What RMT KSA delivered.

• Led an informal debt restructuring programme . We negotiated and agreed an HMRC TTP for £900k over 30 months.
• Negotiated and agreed a 6 month full repayment from cashflow with the receivables funder. New advances being agreed on a case by case basis.
• Negotiated a short rent free period for its two properties.
• Avoided any formal insolvency process .
• Guided the board on a detailed cost cutting exercise.
• Helped strengthen the balance sheet with an agreed inter company debt restructuring with immediate parent and Holdco.

Company B

Historic sales £22m in 2021-22 and profitable. Market changes saw a 50% reduction in sales over the next two years as OEMs cut back on investment, which led to £1.2m losses made 23-24.

Employed 65 people, some redundancies had been made by the board in the last 12 months. However, the large (80,000 sq ft) premises in SE England were no longer essential. Significant (>£1m) dilapidations likely if exited. No secured creditors.

HMRC owed £1.1m for PAYE (preferential debt).

The company cost base needed to adapt to a requirement for fewer than 30 engineers. And sales of £9m, consequently the building and 22 jobs were surplus to the business plans requirements.

What RMT KSA delivered.

To facilitate the necessarily sharp reduction in costs we chose the FORMAL company voluntary arrangement tool to act as the wrapper for all of the changes needed.

• Led the CVA debt restructuring programme.
• HMRC primary preferential liability of £1.1m will be repaid in full over 52 months.
• Negotiated and agreed to an exit from the company’s premises. As a consequence of vacating these premises the Company’s property related costs will reduce by £ 456,000 per annum  AND the dilapidations risk bound into the CVA.
• Guided the board on a detailed cost cutting exercise leading to 25 redundancies.
• Employees’ claims met by the Redundancy Payments Service.
• 25 jobs retained.
• HMRC voted to accept the CVA as did the landlord.
• Unsecured creditors agreed to 20p in £1 dividend in year 5.
• Helped strengthen balance sheet with an agreed inter company debt restructuring with immediate parent, Company A and Holdco.

Summary

This was a challenging and complex group turnaround job. As usual a wide team of RMT KSA experts delivered a first class outcome whilst avoiding pre pack administration or liquidation. We led a programme that avoided the possible “house of cards” collapse of an important international design and engineering group.

Get in touch with Keith Steven if your group could benefit from a review of its options to restructure and adapt to changing markets. Call 07974 086779 or 0800 9700539.