Essex - Terminating a Lease in a CVA After Administration
This client was one of the worlds largest installers of sub sea fibre optic cables. The company was hugely over manned, had too many properties and was acquired by a venture capital company for a small sum. The company was advised by a leading London firm to opt for a CVA but it needed protection from aggressive creditors first. In September 2004 it was placed into administration, with a view to proposing a CVA ASAP.
KSA was asked to manage the business turnaround during the administration period and run the operations which spanned across the world. Under administration rules the administrator can appoint anybody he requires to act as directors or advisors (S13, Insolvency Act 1986). For some 5 weeks we ran 15 ships and employed some 1200 people across the globe.
After a fairly deep cut in people and overheads the plans still showed a need to exit the head office which was costing nearly 1m pa. Keith Steven led the negotiations with the landlords and it was agreed that the company would exit the property as part of the CVA proposals.
Some 12 weeks after the CVA was approved the company exited the lease, and the costs were reduced instantly by 1m a year. The landlords took legal action against the company and the administrator claiming the CVA could not terminate the lease but later dropped the action when it was pointed out that they had actually voted for the CVA that included this termination as a condition!
Clearly, this was a very unusual set of circumstances but demonstrated that ifa sensible approach is used then the CVA is extremely powerful to kill off unwanted contracts like leases.
The company satisfied its CVA in full 13 months alter and is now operating very profitably.
KSA Group believe that this approach is very powerful and has been very rarely used by other insolvency or turnaround advisors (if at all).
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KSA GROUP IS THE UK'S LEADING TURNAROUND FIRM.