Transaction Date: January 2007
Amount: £650k

This well-known DVD rental business was based throughout the South East of England and had been trading for over 15 years.  In 2005 it had turnover of £20m and employed over 150 staff throughout its 55 stores.  The company was funded by a bank overdraft and term loan secured by a debenture and associate company guarantee.

2006 was a difficult year for the company as the hot summer and the World Cup led to a downturn in business. The Directors took advice and withheld payment to creditors including property rent and this led to severe pressure from landlords who threatened foreclosure.

The Directors approached a London firm of Insolvency Practitioners who recommended that the company be placed in Administration to provide protection from landlord action.  A potential independent purchaser offered to pay well in excess of the value of the leases and stock. The Insolvency Practitioner’s strategy was to trade in the remaining stores and dispose of stock in order to maximise realizations, pending further offers for the remaining 35 stores.

The Directors’ Insolvency Practitioner was not on the panel of the Bank and the Directors were concerned that his appointment would be vetoed. However, the Directors were keen to see their chosen Insolvency Practitioner appointed as they had spent some considerable time working on the recovery strategy with him. The Directors were convinced that there would be sufficient realisations if this strategy was to be followed to enable the Bank to be repaid in full, without the Bank needing recourse to the guarantors. The Directors were concerned that if the Bank were to appoint a panel Insolvency Practitioner they would follow a different course of action leading to a shortfall and a subsequent call on the associate company guarantee.

Cable Finance provided the funds to enable full repayment to the Bank and allowed the Directors’ chosen Insolvency Practitioner to proceed with his plan which proved successful.

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