Manufacturer saved by CVA

How quick work led to a company's rescue and turnaround.

The situation

A manufacturing company found itself in trouble when a customer reneged on a sale. Insolvency loomed and one of the shareholders came to see Mark Riley, head of Atherton Bailey's Guildford office.

What we did

Less than a week after the first meeting, Mark had gathered enough information to identify the best way for the business to manage its debts. He recommended a company voluntary arrangement (CVA). The proposed deal with creditors would give the company an agreed timeframe to repay its debts from future profits. However, family investors would have to defer loans they had made to the business to allow it to prioritise other creditors. They also had to face up to a future of lower returns as profits would be used to repay creditors.

Having sounded out stakeholders - including suppliers, customers, the bank and landlord - Mark put a formal CVA proposal to creditors. The creditors accepted.

The result

While family members had to acknowledge their loans were unlikely to be repaid and future earnings would be reduced, the business was nonetheless saved - and quickly. Meanwhile, the business owners took the financial rescue as an opportunity to restructure the operation making it leaner and more efficient.