Bank and Asset Based Lenders restructured and supporting
Around 4 years ago we were asked to help a specialist haulage company that had had a lean period. This was down to the MD being ill and out of the business for a while. In that time the business was not well driven and financial reporting virtually collapsed. Thankfully the MD returned to day to day involvement in time and saw the accounting was in a mess (the BIGGEST COMMON DENOMINATOR IN ALL OF OUR CASES)!
With around 40 different vehicles on HP, lease and contract hire the company had too many vehicles, too much debt to service every month and a loss making business. The MD brought in someone to help with the accounting who after a few weeks confirmed there was a big hole and the company would fail in 4-8 weeks time. Thus the normal approach of talking to their chartered accountants was followed. They in turn introduce a friendly insolvency practitioner!
We were introduced by the insolvency practitioner who realised that this was a good business but needed a rescue. Fortunately for the company most IPs would have simply buried it, but this guy saw a viable company under the mess.
By carefully assessing the weaknesses in the business we were able to set out a rescue plan.
A 4 stage plan was put together as follows
• Introduce a CVA to remove VAT, PAYE and tax creditor pressure
• Work with the bank (Barclays in this case) to restructure the secured lending
• Restructure the 40 leases and HP agreements to get a breathing space for the cashflow, lose some of the vehicles.
• Aggressively manage cash, improve accounting and introduce a non executive director to oversee the recovery.
We can report that 3.5 years later the asset based lenders have all been happy to receive full payment, indeed they are now financing new trucks and trailers.
We have to report that the bank was a superb ally to the company and KSA in the rescue and turnaround process, they allowed the factoring facility and the overdraft to go out for a period of 3 months. They worked closely with the company and KSA to ensure the business was working as planned.
They have seen their faith in the plan rewarded by the owners paying off the bulk of their overdraft lending.
Tax and trade creditors will receive around 40p in £1 over 5 years and the company is again obtaining and paying for credit.
KSA's non executive director stepped down after 15 months of chairing the board; the company is on target to have its best year (2006) for 12 years and has invested in new kit in the last 6 months.
Oh and the company still uses KSA's model to produce meaningful management accounts within 4 days of the month end every month!
THINK THIS INNOVATIVE TURNAROUND APPROACH COULD BE A USEFUL TOOL TO HELP SAVE YOUR BUSINESS? THEN YOU NEED TO TALK TO US NOW.
CALL 0800 9700 539 AND ASK FOR IAIN CAMPBELL OR KEITH STEVEN.