Manufacturing company saved and restored to profitability
A holding company and its two subsidiaries were experiencing financial difficulties, but have been reorganised and restructured into a New Company free of debt through the advice and support of Clarke Bell and Blue Gate Finance.
"A" was the holding company, with two subsidiaries "B" and "C". Both subsidiaries had been trading profitably for many years until, unfortunately, C suffered a large bad debt when one of its major customers went into liquidation. The timing of this could not have been worse, as it happened at the same time as the company suffered a dramatic downturn in new orders as the construction sector slowed down.
The directors took steps to try and rescue the business. Where possible, costs were cut and urgent efforts were made to secure replacement business. In the meantime B supported the group. However, matters became critical and the business struggled to pay its way.
Although the order book for C was partially restored, it was impossible for the group to survive and trade out of the difficulties. By the time Clarke Bell was approached the group had exhausted all credit lines and was heavily indebted to H M Revenue & Customs and trade creditors.
The Bank refused to advance any further funds to allow wages and essential utility suppliers to be paid.
Working closely with Clarke Bell, the business was analysed and the assets professionally valued. We agreed with the directors' view that the underlying business was sound, but that it was impossible for the group to survive burdened as it was with such large debts.
Arrangements were quickly made for a new company to be formed and for finance to be provided into the 'Newco' by an invoice finance lender willing to advance cash as soon as the new company commenced trading.
Each of the three companies was placed into Administration. Arrangements were then made for the Newco (Z) to acquire the assets of the business and the work in progress which Z was able to complete
A package of refinancing was arranged to purchase these assets and the goodwill of the business, with completion taking place within two days of Clarke Bell being appointed as the Administrator. Invoice discounters agreed to provide a facility of £3.2m.
Pending cash being drawn down against invoices, Blue Gate Finance provided a bridging facility from its own funds to enable Z to pay for the assets it was acquiring and to fund immediate working capital requirements.
A new viable business was created and, without the shackles and worries of the old debts, the directors were able to rebuild the entire business successfully.
John Bell, Senior Partner of Clarke Bell, said:
"This is a great illustration of how we can help a business that is basically sound, but finds itself with debt problems. In situations like these, if action is not taken promptly then the problems of one side of a business can bring down a whole company.
Thankfully this was not the case in this instance because of the quick actions of all the parties concerned."....
