Insolvency Case Study London – Prepack Administration

Insolvency Case study – London Engineering Company

Our London office was contacted by an engineering company in Essex that was experiencing significant cash flow problems and financial pressure from a number of its key suppliers. The company had been established for number of years and supplied bespoke parts to the aircraft industry.

The company had an excellent reputation for the quality of its products and held a number of significant accreditations.

Historically the company had been profitable, but during the two years prior to consulting us had suffered trading losses, primarily as a result of failing to pass on the ever increasing cost of raw materials. This was an issue that we identified almost immediately. However, the accumulation of historical debt was so significant, that we concluded that the only viable option available was to place the company into Administration and effect a prepack sale. We initially considered a Company Voluntary Arrangement but concluded that it would not be possible to present a viable plan to the creditors given the level of debt.

This was far from a simple prepack Administration. We had to be satisfied that the customers, being in the airline industry would still continue to trade with the company following such a procedure. Accordingly, we spent significant time alongside the directors outlining the proposed Administration to the company’s key customers and also key suppliers. Additionally, for the Administration to work, new funding was required both for the new company to secure the purchase of the old company’s assets and also to provide initial working capital whilst the new company’s cash flow became established. Using our contacts within the finance and lending sector we introduced the directors to a leading asset backed lender that provided the funding necessary to allow the Administration to go ahead.

Eventually after two weeks of intense discussions, the directors had the confidence that the core business could be salvaged given the level of support expressed by customers and suppliers alike. We were successful in helping the directors secure the finance necessary to complete the deal and accordingly the company was placed into Administration and a prepacked sale effected immediately. The added benefit to this transaction was that all 78 jobs were also saved.

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