A marketing support and telemarketing service company operating in the IT industry was being pulled down by significant historical debt, despite being a growing business.
Since its inception, the company suffered from senior management staffing issues. A series of directors and senior managers were appointed who promised great benefit to the company but instead became a significant drain on the company’s resources at critical times. Also, during this time, unbeknown to the Managing Director, significant PAYE and VAT debt to HM Revenues and Customs accrued.
A variety of overdrafts and loans had also been taken out to finance the infrastructure, pipeline and working capital requirements.
Despite agreeing payment plans with HMRC, significant debts remained outstanding.
The Solution – how we helped
The company had a viable core business, a committed and focused Managing Director and promising profit forecasts. The company had reviewed its overhead costs and made reductions where possible. New customer relationships had been formed and existing customer relationships developed. Agreed price increases and better leverage of fees were also achieved. This all resulted in a healthy forecast for this year with net profit and positive cash flow position predicted for the company.
However, the significant debt still posed a real threat to all this. It was therefore decided that a Company Voluntary Arrangement would be the best way forward. The CVA would protect the business and enable it to continue trading and indeed grow, while debts were repaid over an agreed term. Mike Grieshaber of MLG Associates was appointed supervisor of the CVA.
For this company, the CVA proved to be a powerful restructuring tool which enabled an otherwise successful business to continue operating, with jobs preserved. It enabled pre-existing debts to be paid from future profits and finally the creditors received a better return than would otherwise have been the case.