Transaction Date: February 2007
Amount: £3.5m

This 20-year-old, family-owned plastics molding and extrusion business employed around 140 staff and had turnover of £6m in 2006. Trading from large freehold premises in Hertfordshire with a trading division in Yorkshire, the company suffered reduced margins due to the rising costs of raw materials and severe price competition from overseas competitors. The company was funded through an invoice discounting facility, a bank mortgage and a £1.5m unsecured loan from the Directors.

The Directors approached a London firm of Insolvency Practitioners who recommended that the company be placed in Administration with the Hertfordshire business operation to be run down and the Yorkshire operation disposed of. The strategy indicated that both the bank mortgage and the Asset Based Lender had ample asset security. A substantial dividend to unsecured creditors was forecast and the directors were by far the largest creditors.

The Asset Based Lender accepted the findings and agreed that Administration was indeed necessary. However they decided that an Administrator would be chosen through a tendering process and invited the Directors’ Insolvency Practitioner to apply as a candidate. The Directors were concerned at the prospect of an unknown Insolvency Practitioner winning and asked for time to find a solution. The Bank agreed to a 72 hour delay, but immediately commenced the tendering process.

The Directors approached Cable Finance who, after conducting due diligence, agreed to immediately pay off both the Asset Based Lender and the bank mortgage in full and to provide a working capital facility to the Administrators. The Directors’ chosen firm of Insolvency Practitioners was appointed as Administrator and executed the agreed strategy.

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