Electrical Contractor faces the threat of insolvency
An electrical contracting company faced the threat of insolvency due to its inability to meet a cross-guarantee claim for debts which it had guaranteed from a related entity.
The related entity was wound up after incurring significant losses which triggered potential cross-guarantee claims against the electrical contracting company.
We were engaged to develop a strategy to restructure the balance sheet utilising the voluntary administration process. The process was quite complicated and involved multiple stakeholders, refinancing a secured lender and a deed of company arrangement with an associated creditors’ trust to process payments to creditors.
The directors were very stressed by the complexity of the restructuring and the need to place the company into voluntary administration.
To make matters worse, the restructure had to be commenced shortly before Christmas, creating considerable uncertainty for staff, suppliers and customers alike.
How we turned things around.
We began by developing a high-level balance sheet restructuring and explained to the directors how this could be used to restore the company to viability. This was accompanied by a comprehensive briefing pack for the administrator to minimise the duration of the administration, and reduce uncertainty for both internal and external stakeholders.
The next step was to formulate a deed of company arrangement proposal, which included a complex creditors’ trust with a 25-tier distribution waterfall.
We negotiated a 90% discount of the cross-guarantee creditor’s claim and project managed the refinance of ANZ; at all times maintaining communication with the important stakeholder groups. The administration process was completed in 25 days.
Following the successful restructure we were retained to advise the company moving forward.
There is now a strong governance framework in place, management regularly review the strategic plan and there is a strong culture of accountability.
As a result, profitability continues to improve.