Pre-pack admin gives Manchester firm a bright future

Incorporated in 1931, Thomas Currie and Co. (Manchester) Limited was a very well-established wholesaler of eggs, trading out of New Smithfield Market in Manchester.

Cashflow problems

Alan Taylor was responsible for the day to day management of the business, along with two fellow directors. The business had been passed from generation to generation over the years. However in 2007, the company suffered a number of bad debts totalling approximately £75,000 which had a massive effect on the company’s cashflow position.

Despite this bad debt, the company managed to trade on with reasonable success for several months. However, in 2008 a change in government regulation regarding egg production had a marked effect on the business. Turnover declined dramatically and further bad debts accrued.

The company managed to reduce their overheads to mitigate the problems, but this had little material effect on the overall position.

Raising additional funds

The directors tried to find a lender to support the business. However, due to the Credit Crunch / Recession, no one was willing to help them with their funding requirements.

Turnover was continually declining, bad debts were increasing and there were no additional sources of funds to inject into the business. It was at this stage that the directors sought professional insolvency advice from Clarke Bell.

Pre-packaged Administration

Having reviewed the situation, it was clear that the company should be placed into Administration. As the appointed Administrator, it was John Bell’s function to achieve one of the following objectives:

- rescue the company as a going concern

- achieve a better result for the company’s creditors as a whole than would be likely if the company were wound up (without first being in Administration); or

- realise property in order to make a distribution to one or more secured or preferential creditors.

Numerous discussions took place in the period leading up to the appointment to see if a rescue of the company as a going concern could be achieved. The directors were unable to inject further funds into the business and there were no company funds available to the Administrator to conduct a short-term trading strategy. Therefore it was concluded that the Administrator’s first objective, i.e. rescuing the company, could not be achieved.

The company had physical assets comprising office equipment, motor vehicles and stock. As part of his duties, an Administrator must ensure that he receives the best offer for the sale of assets. So, after making full enquiries and taking advice from independent agents, these assets were sold to Curries Food Services Limited, a connected company. This sale enabled a better realisation of the company’s physical assets than would have been achieved in a forced sale.

As there were no secured or preferential creditors, it was felt that it was the second objective that could be achieved.

The pre-pack served as a rescue package which enabled the business to continue as a going concern. It had a fantastic outcome – benefiting the directors, shareholders, creditors and employees. The alternative would have been Liquidation – which would have resulted in no on-going business, creditors losing out and employees losing their jobs.

John Bell, Clarke Bell’s senior partner, said:

“By using the pre-pack Admin insolvency strategy, the company was able to salvage goodwill and ensure future trade, employment of staff and also enhance realisations to creditors.”

Thomas Currie director, Alan Taylor, said:

“I am delighted that Clarke Bell were able to help us find a workable strategy to enable us to continue. We are now able to put this difficult period behind us and move on.”