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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 (Dec 2009) we have managed to get at least a 45% return for creditors from a zero opening position.
We are currently pursuing additional action that we believe may result in higher returns for creditors.