UK Based print sector company – CVA case study

One of the director’s of the company contacted Robert Moore of KSA to discuss the company’s present financial situation. Then, after subsequent telephone conversations with KSA regional manager, George Davis, a meeting was requested and held between the directors and KSA. The company operates within printing sector.
KSA were appointed to assist the company with a Company Voluntary Arrangement (CVA) in September 2015. Turnover for the 2014 trading year, was c£990K. 
The company was encountering financial difficulties due to:
– Poor financial management over a significant period of time. 
– Investment in equipment  and assets based on a flawed view of the cash position.
– Significant business growth over the last two years, making the current factoring facility insufficient for the company’s needs.
Directors examining alternatives.
– The company is unable to pay its debts as and when they fall due 
– HMRC and trade creditors have threatened to wind the company up 

Premises
– The company occupies a leased industrial unit.

Employees:
– The company employs 25 staff including the directors

Bank & Financial facilities
– The company had an Invoice finance facility which was secured with an all assets debenture.

• As detailed previously the directors were examining alternative facilities.
• As a secured creditor, the invoice finance provider’s debt is not usually compromised within the CVA; and with the provider’s approval will operate as normal during the life of the CVA

– The bank was unsecured with an overdraft of £25K
– The Bank provided no other facilities

Director:
– One of the directors had provided Personal Guarantees (PGs) to the bank.

• A CVA may be a qualifying event for a creditor to seek to rely on the PG’s that have been provided.

– Connected creditor balances amount to c£78K; c£58K of which were Directors’ Loan accounts.

• It is usually the case that connected creditors do not receive a dividend within a CVA.  They are usually expected to waive their claim to those monies and the debt does not survive the CVA 

 Unsecured Creditor debt:
– £400K of which HMRC was c14% 

Cost & overhead reduction 
– prior to KSA’s appointment the payroll was reduced by several positions and a second site of operation was closed.

The directors continued with negotiating and alternative Invoice finance facility, which was obtained on more favourable terms than that of the existing one and so the company changed over to a new facility.  At the same time the directors also decided not to pursue the CVA and KSA’s appointment was terminated.