A marquee hire and events company approached our team in September 2020 with severe cashflow problems and significant historic debt. We were able to help them continue trading through the use of a CVA.
The client & the situation
Marquee hire and events business.
The company approached our team in September 2020 with severe cashflow problems and significant historic debt. Added to this, due to COVID-19 restrictions the business was effectively unable to trade and due to the ongoing restrictions on the sector there was uncertainty as to when it could begin again. As a result, debts were continuing to accrue, and the business was now overstaffed. However, due to the restructuring changes it would incur it could not make any redundancies. The directors were very keen to make sure that the business survived so that clients who numbered over 40 who had booked events and weddings received their service.
What we did
We listened to the business’ issues, provided a thorough diagnosis of the issues directly caused because of COVID-19 and looked at some of the other systemic issues in the business which needed to be addressed promptly for the business to survive.
We then advised the business that the way forward would be a CVA as a rescue tool, in effect a contract between the Company and its creditors which allows it repay debt over a period of time from future trading profits. We were able to build in a period of breathing space where no contributions were due following by a stepped profile to mirror contributions with the expected uptick in activity.
The outcome
The Company was able to continue to trade and supply the service to clients. In addition, the CVA allowed for a reduction in the Company’s staffing levels with the redundancy claims of affected staff processed immediately by RPS and their claims noted in the arrangement. We liaised with the largest unsecured creditor, HMRC, to gain their support and the directors were able to gain support from most of their clients. Due to the change in legislation on 1 December 2020 which gave HMRC preferential creditor status, to maximise the dividend to unsecured creditors in the arrangement it was imperative that the meeting was held in November. Due to a prompt turnaround by our team, the meeting was held on 30 November 2020 which gave unsecured creditors a forecast dividend of 60p in £ as opposed to 41p in £ had the meeting been held from 1 December onwards.
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