This West London based automotive parts supplier entered a Company Voluntary Arrangement (CVA) in October 2016. The company’s creditors agreed a scheme for the company to repay them £418,000 over 5 years.
The company continued trading successfully initially, but faced additional external commercial pressures outside of its direct control. Currency exchange rate fluctuations meant it became more expensive to purchase supplies from outside the UK, some key suppliers had tightened credit terms and continued Brexit uncertainty meant that the board lacked confidence in the future of the company.
Having been in a CVA for 3 years and having repaid £265,000 to creditors over that period, the board decided that it needed to try and exit the CVA early to provide necessary confidence to the company’s bankers, suppliers and customers. It proposed an early settlement to creditors by means of a full and final CVA dividend payment of £90,000. This meant that the company could exit the CVA and all the stakeholders could be confident that the company would have a bright future moving forward.
The CVA Supervisor put the early settlement proposal to creditors, who voted to accept the offer, as a full and final dividend payment. The creditors received a total of £355,000 instead of the previously agreed £418,000 but it did mean they got paid two years earlier than they were expecting. They obviously preferred to accept a 15% ‘discount’ for an early settlement.
Categories: What is a CVA or Company voluntary arrangement?