CLIENT CASE HISTORIES:



Plastic Moulding Business:

Re-structuring Turnaround.

Turnover of this company - (£) 63 Million.

The business was the subject of an MBO in early 2008, with three former directors of the main Plc company arranging to buy out the less profitable Plastic Moulding Section. The moulding section had lost £ 8.4 million the previous year.

Inheriting over 1100 staff with incumbent liabilities reduced via the Plc and receiving an agreed addendum payment of over £ 2 million over 18 months to assist with the transition, this biusiness got off to a good start.

However within 6 months it was evident that product sales income was falling off a cliff and that re-financing before the dowry credits where absorbed in 12 months, was becoming essential; as the original aquisition euphoria was now over and on further inspection the agreed covenants with their existing bankers were now deemed excessive.

Additional disputes about the corporate direction led to one director buying out the other two, as they were unwilling to give further security assurances to the main lender. This in itself caused much friction and impeded the ability for the company to focus directly on the future and problems ahead.

WestCorp was appointed and set about initially seperating the sole directors personal liabilities to the bank, having provided a personal guarantee, bond and floating charge as well as additional personal security undetakings, our client was completely committed to the business but highly geared in security terms to his lenders. In essence the bank owned him and his new business.

We re-structured the asset placements and extracted the key manufacturing assets in security terms from the core trading business, so that if in the future either lenders, creditors or economic circumstances created an environment where the larger business was threatened then a smaller hybrid entity could still perform the key component functions free of the main trading entities problems, to facilitate and service a healthy supply of products to the customer base. In essence a corporate (BICP) was now in place shadowing the existing business, protecting key assets and completely owned by our clients family members, available to be utilised within 24 Hrs notice, should circumstances change.

Having separated the personal position and secured his family interests free from the lender (Mainly the family home) we then set about organising a re-financing package and achieved this within 6 months, moving from one bank to another more flexible lender. We also assisted with the internal stream lining of the trading entities corporate structure, reducing inherited HR excess employees, utilising the skills of key employees, re-structuring all employee contract terms and implementing a serious of automated shift operations that reduced the staff manufacturing headcount by 38%. We also arranged to outsource the back office facilities reducing cost by £13 million in 12 months.

The final re-structuring was completed by creating a customer based interactive website for product ordering. This allowed clients old and new to service orders online and pay online, opening a whole new avenue of approach in terms of marketing and income streams and reducing the previous ineffective marketing spend by investing in new online technologies that halved the sales team yet increased sales productivity by 18%.

The client now trades free of the worry of his main personal assets being part of his lenders underwriting securities to the core business. Has stabilised the core require staff, automated shift working patterns and increased sales throught strategically placed investment in technologies that have a clear osmosis with his product lines and cusomer base needs.

Printing Business:

Short Term Finance Problem:

Turnover of this company - (£) 840,000. This business was struggling to cope with various order completions and some of the major debtors were dragging there feet this in turn put pressure on the directors. All of the businesses borrowings were related to one lender. All directors had given Personal Guarantees two had put their homes on the line. WestCorp provided Business Insolvency Cover for all but one of the director. Re-financing was completed in 4 weeks, the debtors payment time was drastically reduced and the cash flow problem eased. Within 4 months the problem was over, the directors were now far more comfortable with the idea of dealing with any future problems, mainly because the weight of worry associated with their personal securities given to lenders was diminished.

Public House Chain:

Restructure: Turnover of this company - (£) 3.5 million. The principle director contacted WestCorp after reviewing our literature. The business had some problems with Customs VAT some 18 months previous but had been shocked at the potential pitfalls that could have arisen if their current Accountants had not sorted out the problem. VAT assessments were made and a number of months of surcharges accrued leading to problems. All of this took more than a year to resolve, but the worry associated with the incident had left the client feeling vulnerable. His business was his one and only source of income. WestCorp set up a comprehensive Business Insolvency Cover Plan that related specifically to the clients needs. It was his intention to sell the business within the next 10 years. He signed up for a 10 year plan and included all that he owned, business and personal. He felt that the premiums were an affordable way of protecting his interests, as he had previously no type of cover in place and felt very vulnerable to creditor pressure when it occurred.

Wallpaper Shop Owner:

Turnover of this Sole Trader business - (£) 180,000. The client operated as a Sole Trader and had been in business for 4 years, while they had experience in the business stock was not selling as expected. Rental arrears was looming and the current liability due to two main suppliers for wall coverings and paint stock was moving into a 90 day scenario. Customs and the Inland Revenue payments were all up to date. A fundamental review highlighted that the business at that point in time was insolvent. The clients main concern was their house. While a second charge had been given to the lenders a larger proportion of equity still remained. WestCorp actioned a Business Insolvency Plan within 21 days and covered all of the available equity, thus protecting the clients single most valuable asset their home. It was agreed to re-structure the business, make arrangements with the suppliers and action some stringent cost cuttings. With the potential threat of loosing their home now removed, the business was back in the black within 7 months and the clients free of their main concern: would they loose their home!

Newsagent's Shop Owner:

Turnover of this Sole Trader business - (£) 90,000. The business was a small family affair with many hours worked by all. The clients had been in business for 18 years and stated that the last 6 years had been a nightmare. They had given security to their bankers by allowing a second charge over their home and on at least three occasions in the past 6 years felt that the threat of loosing their home was imminent. The client was referred by their solicitor and WestCorp reviewed and accepted their application. A Business Insolvency Plan was actioned and the house equity was covered as well as the all shop fixture and fittings associated with the business right down to all movable items in their home, even the ashtrays! The clients were happy to pay an affordable monthly premium to protect their hardest earned asset, their home.

Bakery Business:

Turnover of this Company - (£) 21 Million. The business was run by four brothers as the father had recently retired. The business consisted of 15 shops and one main bakery and had 250 plus staff. The initial application indicated an insolvent state during particular months of the year. That coupled with their existing lenders uncertainty over the direction the four sons intended to take the business left an atmosphere of worry and concern. Initially the directors main concern was to protect the business but it soon became apparent that each of their own positions was under threat if the business was to fail. So they all looked to cover their own positions. A Business Insolvency Plan and two Personal Insolvency Plans were actioned. Safe in the knowledge that their personal positions were covered and that a large part of the businesses assets wee covered the remaining two directors setup a strategy of cost cutting and savings. While the current lenders began to relax more as income streams once again started to flow and supplier demands were altered and agreed the clients were still concerned about the level of security given to the lenders. As the income grew and the overdraft facility reduced the subsequent level of cover afforded the Insolvency Cover Plan increased. The ownership of the assets slowly started to accrue more to the (ICP) than the lenders in essence the directors started to claw back more ownership of the business. They intimated that they found it easier to deal with all these problems, safe in the knowledge that their homes were protected from any possible fall out if the business had floundered, in the past that was never the case.

Manufacturing Business:

Turnover of this Company - (£) 600,000 - This Business Did Not Make It! Having been in operation for over 60 years this business had seen many trends come and go. However the principle owner director who was now moving towards retirement had become beholden to their main customer and the income from this customer had been reducing over a number of months. Such was the case that more was being supplied but less was being paid for these supplies, as the customer was demanding ever increasing discount or the order would go elsewhere. The dependency was a worry but a bigger worry was the fact that the clients home and the business was all secured to their bankers and a major supplier/creditor. An application for a Business Insolvency Cover Plan was received and approved. Business and personal assets were covered.In this instance the clients main worry again was the home having worked in this business for the past 40 years the fear of losing everything was looming large. However after various months of negotiation the bankers called in the securities and a liquidator was appointed. The liability to the bankers was tied to a personal guarantee and a secured second charge to the clients property. This meant that the bank could force the client to legally sell his home in order to settle the amount due on the business overdraft and the sums were rising. WestCorp indicated to the liquidator that a Business Insolvency Cover Plan was in place and provided details showing the (BICP's) secured interests. As the liquidation went relatively smoothly and the sale of assets associated with the business proceeded under the liquidation, minus a number of core assets covered by the (BICP) the bank pursued the client and demanded that he immediately sell his home and pay off the overdraft debt. (Under normal circumstances the lender can do this and in many cases a property is put on the market at a forced sale value, normally much less than the actual value). The bank was made aware through WestCorp that they could not force a sale of the home as WestCorp acted for the (BICP) and as such provided proof of a legally registered third charge over the clients home. Legal debate ensued and at the conclusion the bank agreed under evidence from WestCorp to allow the client a greater period of time to settle the debt and sell the property. In the event and with some difficulty the client managed to re-mortgage within 7 months and release a substantial sum without having a forced sale of his property. The bank debt was settled at a sum free of the original pecuniary charges.

Conclusion:

While the clients business was lost and he received absolutely nothing from the liquidation. The client under normal trading circumstances and without a Business Insolvency Cover Plan in place would have lost everything, including his home. The (BICP) through WestCorp allowed the client additional breathing space to arrange his affairs, personal and business within the volatile atmosphere of a liquidator demanding details about the business and bankers demanding their secured funds back. The client serviced his debt, had additional assets and funds to restart a newer smaller business. Without a (BICP) non of this would have been possible, the house would have been sold and no assets would have been available.

Copyright WestCorp 2005/09.