Powerplan

Restructuring & Turnarounds using formal insolvency procedures

Powerplan - Administrators

Powerplan ran an extended warranty scheme on electrical consumer goods which also provided the consumer with 100% guaranteed cash back if there was no claim on the warranty. The scheme became insolvent as a result of the misapplication of funds that should have been held on trust for the cashback claimants.

TMP were appointed as Administrators with a complex legal appointment given the multi jurisdictional nature of Powerplan’s legal structure. At the time of our appointment the position looked extremely bleak:

• There were approximately 750,000 consumers who had taken out the extended warranties – who

had paid approximately £90m service payments.

• The scheme sub-contracted managers had not been paid meaning that there was no operational

support at all during the meltdown phase - the claimant information (which was critical) became

progressively worse.

• The repairers network set up to provide warranty repairs had collapsed and could no longer provide

any service.

• There were no funds to pay any of the 3 classes of creditors.

o The cash back claimants.

o The consumers claiming warranty repairs, and

o The repairers who had repaired prior warranty claims but at the time of the insolvency had not

been paid.

• There were also no funds available to run the operational business and to commence recovery work

– so we had to carry out the necessary work (see below) entirely at risk.

Over a three year period we took the following steps:

• Set up a call centre in London to deal with the massive volume of calls after the business went into

insolvency.

• Set up a court sanctioned scheme where the warranty claimants could claim under a capped repair

scheme funded by the warranty repair insurer. This effectively gave warranty claimants

approximately 85% return on their claims – which was a massive improvement on their opening

position.

• Recovered funds held in offshore trust accounts.

• Entered into a voluntary compromise agreement with a major corporate who had originally set the

scheme up and subsequently sold the business to a third party.

• Acquired as part of the voluntary compromise the captive insurance company – which allowed us to

commence “look-through” claims to funds held by the captive and its re-insurers.

• Moved the call centre to Cape Town in South Africa to cut down the administration costs – we believe

that this cut the costs by as much as £600,000 to £1,000,000 – which had a very material impact on

the returns to creditors.

• Using the captive insurance company entered into settlements with:

o Trust funds held by the captive that we believed belonged to Powerplan creditors.

o Re-insurers.

The net effect of the above is that at the time of writing (June 2007) we have managed to get a 48% return for creditors from a zero opening position.

We are currently pursuing additional action that we believe may result in higher returns for creditors.

www.powerplaninadministration.co.uk

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