Accident management firm crashes causing 100 job losses
(Source: TheBusinessDesk.com)
An £18m-turnover business based in Manchester which provides vehicles for people who have been in road traffic accidents has been placed into administration, with the founder claiming a lack of support by the company's former bank for its downfall.
Kyle Harris, who set up Britannia Car Hire Service Ltd, which trades as Britannia Accident Assist, with co-director Rob Street 11 years ago.
The pair had grown the business into a profitable operation employing 120 staff across five depots, but when he requested an additional £500,000 from his bank, Lloyds TSB Commercial Finance, to cover cashflow it sparked a chain of events which saw the business move from a healthy financial position into distress, he alleges.
He said that the request led to a demand by the bank for an independent business review by accountancy firm Ernst & Young. Despite being forced to pay £55,000 towards the cost of the review, Mr Harris said that he was unable to see its findings, although it eventually led to the bank "turning the tap off" on the company's funding stream around six weeks ago.
In the year to July 31, Mr Harris said that the the business made a pre-tax profit of £380,000 - even after accounting for exceptional costs, including the Ernst & Young report. It owed its bank, Lloyds, £3.4m through a mix of asset finance, invoice discounting and overdraft facilities, and around £2.1m to other creditors.
Mr Harris, told TheBusinessDesk.com "We were inherited from HBOS and we're not a popular business because of the length of time it can take for us to get paid."
Although typical payment terms for invoice discounting providers can stretch from 90 to 120 days, Mr Harris said that its average payment period from insurers had moved out in recent years from 220 to 305 days.
He said the company first received notice from Lloyds that it was no longer willing to support the business around three months ago - at which stage it began to look for alternative sources of finance.
He argues that other private funders subsequently declared an interest in the firm, with one recent party requesting a stay of execution, until a potential buyer had completed a period of due diligence of four to six weeks.
However, he claims that the bank was unwilling to continue its support.
During the six weeks that the bank stopped funding the business, Mr Harris argued that cashflow generated allowed it to repay around £1.8m to Lloyd's coffers, but this created pressure from other creditors and eventually it filed a notice of intention to appoint administrators two weeks ago.
A deal was agreed with distressed lender Cable Finance to borrow the remaining £1.6m to repay the bank in its entirety so that the company had more control over who was appointed as administrator.
Mr Harris sought this because he believes that a bank-appointed administrator was unlikely to have been able to recoup as much as its own recovery team. This was important not only to the directors who are owed £850,000 worth of unsecured loans from the company, but also to ensure that suppliers receive a better return.
He anticipates this to be healthy, as even after the extra costs of taking on distressed debt he estimates its total liabilities to be worth around £6.5m, but the business has book debts of £12m and net worth of around £3.5m in its fleet of cars even after financing costs.
Bury-based insolvency firm Leonard Curtis confirmed that Andrew Poxon and John Titley were appointed as joint administrators to the company last Thursday. Around 100 staff have already been laid off, but its recovery team has been kept in place in order to help recoup debts.
Lloyds Banking Group, parent company of LloydsTSB Commercial Finance was contacted, but said it could not comment on individual cases.
