Administration of a company impacted by COVID-19 achieves enhanced asset realisations for creditors.
As a result of the COVID-19 pandemic the company’s order book had collapsed and they were facing a funding shortfall of £500k to continue trading. Our One80 experts were introduced to the client via their accountant who the directors had contacted following a review of their cash flow forecasts.
Due to uncertain economic conditions and the hospitality and leisure industry being particularly hard-hit, the company’s cash flow had suffered significantly. They were owed in the region of £150k from clients but due to the pandemic, were finding it hard to collect their debts as their customers were withholding payments. Due to a limited resource of available cash, the business would be unable to pay their staff at the end of the month.
Our experts noted that the company owned 1,200 units, with a value estimated to be between £250-500K, which they historically leased to premier events around the country including horse racing venues, county fares and royal events. It was clear that there may be value in the business and assets, however due to the uncertainty surrounding this sector, there was a hesitant appetite to take-on the business as the assets may not generate any income for at least a year, subject to lockdown restrictions which were unknown at the time.
As a result, administration was decided to be the desired insolvency procedure as the company required protection from its creditors whilst the administrators considered various options for the business and assets. We worked with the directors to communicate a strategy to the staff informing them that the business and assets would be marketed for sale as a going concern, and as part of this a number of redundancies were to be made in order to streamline the business. The remaining staff were paid to continue to collect the company’s stock which was located all across the country but held value.
Administration of a company impacted by COVID-19 achieves enhanced asset realisations for creditors
They were owed in the region of £150k from clients but due to the pandemic, were finding it hard to collect their debts as their customers were withholding payments.
Our experts instructed valuation agents to conduct a marketing campaign for the business and assets but the sale of the business was unfortunately not viable due to the pandemic. Instead, an enhanced realisation for the company’s stock was achieved. Invoices and other debtor records were collected and passed to a specialist debt recovery expert to take on the collection work. The realisations from the company’s debtor ledger have been better than expected and a dividend to creditors will be paid.