Fernturn Holdings Limited (formerly Wilts Wholesale Electrical Company Limited) ( the Company ) Scheme of Arrangement ( the Scheme )

Transcription

1 Fernturn Holdings Limited (formerly Wilts Wholesale Electrical Company Limited) ( the Company ) Scheme of Arrangement ( the Scheme ) Report to Creditors Committee 18 December In accordance with clause 6.3.3(b) of the Scheme documentation, this is the Scheme Supervisors first progress report to the Creditors Committee. Attached at Appendix A is a Receipts & Payments account for the period 19 September 2012 to 30 November Background to the Scheme 2 Full details of the background to the Scheme are provided in the Scheme documentation circulated to all creditors. In summary, following a sale of the Company s business and assets to Rexel UK Limited ( Rexel ) in February 2012, a revaluation of the Company s liability to its defined benefit pension Scheme in March 2012 identified that this liability was considerably greater than previously estimated. As a result of the increased pension liability, the Company was insolvent. 3 The directors of the Company proposed a Scheme to reach a compromise with the identified Scheme creditors in respect of their debts, with a view to providing an increased return to creditors than would have been available in an alternative insolvency procedure. Scheme effective date 4 On 13 August 2012 the Scheme documentation was circulated to all known Scheme creditors, and a meeting of the Scheme s ordinary and pension creditors was called for 4 September The Scheme was approved by the creditors at that meeting, and the Scheme was subsequently sanctioned by the Court on 19 September This became the Scheme effective date. Creditors Committee 5 A Creditors Committee was formed subsequent to the meeting of Scheme creditors on 4 September 2012, there being insufficient nominees coming forward at the time of the meeting. The first meeting of the Creditors Committee was held by conference call on 15 October The members of the Creditors Committee are: Fiona Ridley Le Grand/Zucchini Busbar UK Limited Nikki Alford Prysmian Cables Limited Stephen Headdey Airflow Developments Limited Asset Realisations 6 A cash balance of 1.774m has been remitted into the Scheme by the Company to date. We are working with the Company to finalise the cash reconciliation and anticipate a final cash remittance of approximately 15k will be made into the Scheme. 7 This will bring total cash balances paid into the Scheme to 1.789m, which is 36k less than forecast in the Estimated Outcome Statement ( EOS ) included in the Scheme documentation in August This difference arises from sums paid out of the cash balance held relating to rent and rates payable for the period 1 to 18 September 2012 (pre Scheme effective date). 8 These costs have been partially offset by the release of pre-scheme effective date professional fee provisions and refunds received by the Company, payable to the Scheme. 9 In addition to the above, a total of 708k has been remitted to the Scheme in respect of the balance held on the stock escrow account. This represents a decrease of 66k on the original estimated surplus payable to the Scheme of 774k, and relates to funds released from the stock escrow account to settle an ROT claim in line with the terms of the sales agreement with Rexel.

2 10 These remittances bring total estimated Scheme assets to 2.497m, 102k less than estimated in the Scheme documentation. Bar date and claims agreement progress to date Bar Date 11 Creditor claim forms, together with supporting documentation, must be received by the Scheme Supervisors by 5pm on 20 December 2012 (the Bar Date ), being the first business day falling three months after the Scheme effective date. Scheme claims submitted after the Bar Date will not qualify for a payment under the Scheme. Pension Creditor 12 In accordance with clause 11 of the Scheme documentation, a payment of 1,267,015 has been paid to the Trustees of Wilts Wholesale Electrical Co. Ltd Retirement Benefits Scheme ( the Pension Creditor ) out of Scheme funds. The balance of 3.06m payable to the Pension Creditor under the Scheme was paid from the unascertained Creditors Trust Fund (as defined in the Scheme documentation) on 20 September Pre-determined Scheme Creditors 13 Since the Scheme effective date of 19 September 2012, the Scheme Supervisors have been working with the Company to review a sample of 10% (in number and value) of the Pre-determined Scheme Claims ( PDSC ), as defined by the Scheme documentation. The purpose of this sample testing was to establish whether: a) details of the PDSC as set out in Schedule 5 of the Scheme documentation were adequately supported by Company documentation, b) details of the quantum of the PDSC were sufficient, the basis of the calculation was reasonable and had been accurately applied, and c) any set-off was to be applied to the claim(s). 14 A random sample of 80 PDSC (value: 562,502.99) was selected, representing 10% of claims in number and 10.9% of claims by value, and we have undertaken a review of the gross value of those sample claims. 15 In undertaking the sample testing it was identified that there had been an error in the workings from which Schedule 5 had been compiled, resulting in the gross value of a number of the PDSC per Schedule 5 being understated by a total of approximately 90k. The Company has provided us with a revised PDSC schedule, corrected for this error. 16 The Company has been unable to supply full documentation to support a number of the sample claims due to the way in which supplier information was held on the Company s systems. Due to the high volume, low value nature of the majority of the Company s transactions, many account balances are made up of numerous transactions. However, the Company has liaised with Rexel to source the necessary supporting documentation. 17 In light of the above, the result of the sample testing is that further work is required to agree the PDSC claims. In the interests of cost efficiency and maximising the level of returns to Scheme creditors, we have undertaken the following work to gain comfort on the value of the PDSC: a) PDSC creditors which have submitted claims to the Scheme Supervisor post Scheme effective date, where the amounts agree to the revised schedule provided by the Company, have received confirmation that their claim is agreed; b) PDSC creditors which have not submitted claims to the Scheme Supervisor post effective date have received correspondence detailing the value of their claim per the revised

3 schedule provided by the Company. These creditors have been asked to confirm their agreement or otherwise to the revised claim amounts; c) Claims from PDSC creditors submitted to the Scheme Supervisor post Scheme effective date, where the amounts do not agree to the revised schedule, will be dealt with as set out in the Scheme documentation. On account payments 18 As set out in clause 2.5 of the Scheme documentation, following the sale to Rexel the Company made certain payments to or for the benefit of its creditors. These payments included on account payments to ascertained creditors via three instalments in March, April and May These payments were estimated to equate to 30p in the. 19 Our ongoing claims agreement work has identified that, as a result of a calculation error in the list of PDSC included in the Scheme document at Schedule 5, and movements on the Company s ledgers post this list being run, the on account payments made by the Company represent varying amounts as regards a pence in the distribution. Of the total of 794 PDSC, 498 creditors have received on account payments which represent more than 30p in the. 20 To the extent that PDSC creditors have received more than the estimated final dividend available to creditors in the Scheme, those creditors will receive no further distributions. In total, 399 PDSC and sundry (see below) creditors, have received an on account payment which equates to 43p in the or more of their gross claim (total gross claims value of 417,808). Those PDSC creditors which have received less than the final estimated Scheme dividend will receive a distribution which will bring them in line with the overall final estimated Scheme distribution. Sundry creditors 21 Since 19 September 2012 we have been notified of 60 creditors which received payments on account from the Company, but were not listed on the PDSC schedule in the Scheme documentation. We have written to these sundry creditors on the same basis as the PDSC creditors in 17b) above. Unascertained creditors 22 Unascertained creditors comprise landlords, Local Authorities for rates, finance companies, HM Revenue & Customs and certain damages and rebate claims. These creditors will have received the Scheme documentation and Scheme effective notification letter, both of which invited claims to be submitted. 23 We have been working with the Company to review the claims received from landlords (seven claims received to date), which comprise claims for unpaid rent, dilapidations and other sums due under the leases. We are seeking to mitigate the level of landlords claims into the Scheme by agreeing surrenders or forfeiture of the more onerous leases. This work is ongoing. 24 To date we have received 21 unascertained creditor claims, with a total value of 692,282. We are reviewing these claims with the Company and have issued a reminder letter to those unascertained creditors still to submit a claim. Professional fees Scheme Supervisors fees 25 At the time the Scheme was circulated to creditors in August 2012, we estimated that Scheme Supervisors fees would total 115k plus VAT plus disbursements.

4 26 On 19 November 2012, we advised the Creditors Committee that our estimate of total Scheme Supervisors fees had increased to 145k plus VAT. This increase has arisen due to: - the level of work required in respect of the sample testing of PDSC given the issues identified as detailed above. At the time of our original fee estimate, it was anticipated that the Company would complete the majority of the review work, reporting back to us as Scheme Supervisors. As a result of the issues encountered, we have been required to take a much more involved role in this workstream; - ROT creditor claims submitted just before the Scheme effective date which required input from us as Scheme Supervisors; and - the complexity of some of the potential landlords claims, which we have sought to minimise in the interests of Scheme creditors as a whole. This has required us to work with the Company and TLT to assess and understand the various landlord positions as well as directly negotiating with landlords and their representatives. 27 To 30 November 2012 the Scheme Supervisors have incurred total time costs of 90,658. This represents 420 hours at an average hourly rate of It has been the Scheme Supervisors policy to delegate the routine administration of the Scheme to junior staff in order to maximise the cost effectiveness of the work performed. These staff have been supervised by senior staff and the Scheme Supervisors. Any matter of particular complexity or significance that has required responsibility of an exceptional kind has also been dealt with by senior staff and the Scheme Supervisors. 29 Details of the time costs incurred for the period to 30 November 2012, by work category, are attached at Appendix B. 30 The Scheme Supervisors have incurred disbursements of 1,107 for the period to 30 November 2012 in relation to advertising, mileage and other Scheme related expenses. 31 We would be pleased to receive the Creditors Committee s approval to our drawing fees and disbursements of 90,658 and 1,107 respectively, plus VAT, in respect of costs incurred to 30 November 2012 as set out above. This request replaces our fee request of 19 November 2012, communicated to the Creditors Committee by . Legal fees 32 TLT s estimated fees in August 2012 were 45k plus VAT, based on the matters TLT anticipated it would be required to deal with post Scheme effective date. TLT s costs incurred to 30 November 2012 amount to 40,059, and TLT now estimates its total costs for the Scheme will be in the order of 60,000, representing an increase of 15k on its original estimate. 33 This increase has arisen due to TLT dealing with a number of issues which were not anticipated at the time the Scheme documentation was compiled, or which have proved more complex than first anticipated. The matters include landlords and rating authority claims, ROT claims and the release of ROT escrow monies, and advising the Scheme Supervisors as regards the issues encountered with the PDSC and general Scheme mechanics. Company costs 34 To 30 November 2012 we have settled management charges in respect of Company directors time spent dealing with Scheme issues totalling 41, Total estimated management charges for the Scheme remain in line with the estimate provided in the Scheme documentation.

5 Estimated outcome for Scheme creditors 36 Our claims agreement work is ongoing, and we will have better visibility as regards the final level of unsecured creditor claims once the bar date has passed. 37 On the basis of estimated asset realisations and Scheme costs, we currently anticipate Scheme creditors will receive a dividend of approximately 38p in the. This represents a deterioration of 5p in the on the estimated distribution at the time the Scheme documentation was circulated in August The reasons for this estimated deterioration are covered above, however, this estimate assumes all known creditors submit a claim in the Scheme, and these claims are agreed at the highest current estimate. To the extent that creditors do not claim, or claims are agreed at lower amounts, the estimated final distribution may increase. 39 The estimated dividend of 38p in the available under the Scheme remains higher than the estimated return to Scheme creditors in a formal insolvency process, as per the Scheme documentation, of 35p in the. It should be noted that the estimated return in an insolvency situation would have been similarly impacted by the issues detailed above. Other matters 40 The Creditors Committee is due to meet by conference call on 19 December 2012 to discuss the progress of the Scheme. We propose to submit our next report by 19 March 2012, by which time the bar date will have passed and we would anticipate much of the claims agreement work will be concluded.

6 Appendix A Fernturn Holdings Limited (formerly Wilts Wholesale Electrical Company Limited) Scheme of Arrangement Receipts & Payments for the period 19 September 2012 to 30 November 2012 Receipts Cash received (including stock escrow) 2,498, ,498, Payments Pension creditor 1,267, Management charges 41, Bank charges ,308, Balance at bank 1,190,107.28

7 Appendix B Fernturn Holdings Limited (Scheme of Arrangement) Time costs to 30 November 2012 Work Type Partner Director Senior Manager Manager Senior Associate Associate Total time Total cost Strategy and planning ,040 Team management ,074 Accounting and treasury ,841 Statutory and other compliance ,457 Pre-Determined Scheme Creditors ,742 Unascertained Creditors ,142 General creditor queries ,547 Reporting / Liaising with Creditors' Committee ,319 Website Comms ,390 Landlords & Property Related Matters ,941 Rexel ,614 HMRC Pensions Distributions Closure Total hours ,658 Scale Hourly Rate Partner 540 Director 450 Senior Manager 395 Manager 310 Senior Associate Associate Support 80