Visitor Centre Suffering From Onerous Contracts

The Challenge

An environmental visitor centre with retail and catering facilities faced financial difficulties due to several factors: an overestimation of projected income, overly expensive contracts, and insufficient advertising. The business model’s flaws created a cash flow problem that required a significant restructuring to survive.

The Solution

The company’s director, with the help of RMT KSA, developed a rescue plan focused on a one-off payment to creditors instead of a long-term Company Voluntary Arrangement (CVA). This was made possible by attracting a new investor who injected crucial funds. The director also negotiated with the bank, a secured creditor, to reduce its exposure. In exchange for paying the bank £1.25m, the director was released from his £2.5m personal guarantee. This de-risked the director while simultaneously making the bank more comfortable.

The Results

The strategic planning and negotiations were a success. The new investment provided both the necessary working capital for the business and the funds to make a one-off payment of 25p in the pound to unsecured creditors in full and final settlement of their claims. This arrangement was preferable to a long-term CVA for both the director and the creditors, allowing the company to quickly resolve its debt issues and focus on its future.