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Restructuring and Turnarounds using formal insolvency procedures
Southend Property Holdings - Administrators and Supervisors of a CVA
Southend was formerly part of a listed property group – the Hampton Trust group. Southend was materially insolvent although it owned approximately £75m of property assets – including interests in Arena Central in Birmingham (UK).
• It had material creditors
o tax liabilities of approximately £18m to £20m – that had been incurred over many years with
no attempt to pay the liabilities.
o Debentures of approximately £64m, and
o Complex and very large inter company liabilities to its former holding company and associated
entities. However - they had little or no audit trail showing how these liabilities arose.
• Very importantly
o There were large prior transactions that had resulted in assets being transferred out of the
Southend group to the Hampton Trust group – without valuable consideration being made for
the transaction.
Our first step was to sell the tangible property assets to a connected party for value but with full sanction of creditors. Our next challenge was to find out the facts of the prior – and potentially voidable - transactions. Once we had established the facts as we saw them – we then entered into very protracted negotiations with the former holding company and its advisors. We needed to prove to them that there was a case to answer and then strike a deal that the materially cash strapped former holding company could afford – yet satisfy the creditors that this was the best deal that could be done.
We eventually settled on an out of court settlement which obtained 100% of creditor approval. This settlement achieved a material improvement in return to creditors.
The Southend group companies exited Administration by way of a Company Voluntary Arrangement (CVA) in order to make distributions to creditors. In summary, payment in full was made to the debenture holders, the preferential creditors and the unsecured creditors in all of the Southend subsidiary companies. The unsecured creditors in the holding company, including HMRC, received a 28% return.
HMRC was delighted with this result and wrote to TMP to say: “I find it particularly satisfying to see an excellent outcome of a case which was fraught with difficulties, A very good result, well done”.