www.pwc.co.uk/jrsc Joseph Rhodes Limited and Slater & Crabtree Limited both in administration 17 October 2016 High Court of Justice, Chancery Division, Leeds District Registry Case numbers 739 and 738 of 2016 Joint administrators proposals for achieving the purpose of administration
Contents Abbreviations and definitions 2 Why we ve prepared this document 3 A summary of what you could recover 4 Brief history of the Companies and summary of what we ve done so far 5 Our proposals for achieving the purpose of administration 13 Statement of affairs 15 Statutory and other information Joseph Rhodes Limited 16 Statutory and other information Slater & Crabtree Limited 17 Receipts and payments accounts 18 Appendix A: Group structure 20 Appendix B: Pre-administration costs 21 Appendix C1: Summary of the statement of affairs for Joseph Rhodes Limited 23 Appendix C2: Summary of the statement of affairs for Slater & Crabtree Limited 26 Statement of Claim form available to download from our website www.pwc.co.uk/jrsc Joseph Rhodes Limited and Slater & Crabtree Limited (both in administration) joint administrators proposals for achieving the purpose of administration
Abbreviations and definitions The following table shows the abbreviations and insolvency terms that may be used during this document Abbreviations or definitions Administrators the Bank BEL the Companies CVA CVL Group Rhodes HMRC Meaning Toby Scott Underwood and Lyn Leon Vardy HSBC Bank Plc Beauford Engineers Limited Joseph Rhodes Limited and Slater & Crabtree Limited both in administration Company voluntary arrangement Creditors voluntary liquidation A corporate structure of eighteen entities known collectively as Group Rhodes, including Joseph Rhodes Limited and Slater & Crabtree Ltd HM Revenue & Customs IA86 Insolvency Act 1986 IR86 Insolvency Rules 1986 JRL Ongoing Businesses preferential creditors prescribed part PwC RAA RIL RPS S&C Joseph Rhodes Limited The trading entities in Group Rhodes other than Joseph Rhodes Limited and Slater & Crabtree Limited Claims for unpaid wages earned in the four months before the insolvency up to 800, holiday pay and unpaid pension contributions in certain circumstances The amount set aside for unsecured creditors from floating charge funds in accordance with section 176A IA86 and the Insolvency Act 1986 (Prescribed Part) Order 2003 PricewaterhouseCoopers LLP Richmond Asset Advisory Rhodes Interform Limited Redundancy Payments Service, an executive agency sponsored by the Department for Business, Innovations & Skills, which authorises and pays the statutory claims of employees of insolvent companies under the Employment Rights Act 1996 Slater & Crabtree Limited Sch.B1 IA86 Schedule B1 to the Insolvency Act 1986 secured creditors Creditors with security in respect of their debt, in accordance with section 248 IA86 TUPE Transfer of Undertakings (Protection of Employment) Regulations 2006 unsecured creditors WIP Creditors who are neither secured nor preferential Work in progress 2
Why we ve prepared this document I previously wrote to you to tell you that on 23 August 2016 the Companies had gone into administration and that Toby Underwood and I had been appointed as Administrators. We tell you in this document why the Companies were put into administration. We give you a brief history and set out our proposals for achieving the purpose of administration. We include details of the Companies assets and liabilities, and say how likely we are to be able to pay each class of creditor. According to IA86, the purpose of an administration is to achieve one of these objectives: (a) (b) (c) rescuing the company as a going concern, or if that is not possible or if (b) would achieve a better result for the creditors than (a) achieving a better result for the company s creditors as a whole than would be likely if the company were wound up (without first being in administration), or finally, if that is not possible realising the company s assets to pay a dividend to secured or preferential creditors. For both administrations we re following (b) as it was not reasonably practical to rescue the Companies as going concerns. Our job is to manage the Companies until creditors agree our proposals for achieving the purpose of administration and we ve implemented them so far as possible. After that the administrations will end. This document and its appendices form our statement of proposals for achieving the purpose of administration. As explained later in this report, we have formed the view that the Companies have insufficient property to enable a distribution to be made to unsecured creditors. Accordingly, by virtue of Paragraph 52(1)(b) Sch.B1 IA86, a meeting of creditors is not being convened at this time in respect of either of the Companies. In accordance with Rule 2.33(5) IR86, our proposals will be deemed to have been approved by creditors unless a meeting of creditors is requisitioned in the prescribed manner by at least 10% in value of creditors within eight business days of the date on which these proposals are circulated. We will write to creditors again after the expiry of this period to confirm the deemed approval of the proposals, or alternatively confirm that a meeting is to be held. If you ve got any questions, please call our creditor helpline on 0113 289 4888. Signed Joint administrator of Joseph Rhodes Limited and Slater & Crabtree Limited Lyn Leon Vardy and Toby Scott Underwood have been appointed as joint administrators of the Companies to manage their affairs, business and property as their agents and act without personal liability. The joint administrators are licensed in the United Kingdom to act as insolvency practitioners by the Institute of Chartered Accountants in England and Wales. The joint administrators are bound by the Insolvency Code of Ethics which can be found at: https://www.gov.uk/government/publications/insolvency-practitioner-code-of-ethics The joint administrators are Data Controllers of personal data as defined by the Data Protection Act 1998. PricewaterhouseCoopers LLP will act as Data Processor on their instructions. Personal data will be kept secure and processed only for matters relating to the administration. 3
A summary of what you could recover Estimated recovery for secured creditors What secured creditors are owed: JRL Debt Demanded Contingent liabilities Total The amounts due to the Bank are secured by fixed and floating charges over all of JRL s assets. S&C S&C guaranteed JRL s debts to the Bank and provided security by way of fixed and floating charges over its assets. See debt values listed above. 6,711,826 2,271,379 8,983,205 What we think the secured creditor could recover: JRL (by virtue of the Bank s security over its assets and cross guarantee from S&C) 32% within 18 months Estimated dividend prospects For preferential creditors: i.e. former employees (for unpaid wages up to 800 and holiday pay only) and unpaid pension contributions in certain circumstances: JRL S&C For unsecured creditors: i.e. all other creditors who are neither secured nor preferential: 100% 100% 12 months 12 months JRL 0.7 6.5% 18 months S&C 0.00-5% 18 months Please note this guidance on dividend is only an indication. You shouldn t use it as the main basis of any bad debt provision. This is a brief summary of some of the matters detailed in these proposals. There are more details in the rest of this document. 4
Brief history of the Companies and summary of what we ve done so far Background The Companies were incorporated on 12 August 1899 and 3 August 1927 respectively. S&C was a wholly owned subsidiary of JRL and they both formed part of Group Rhodes, a corporate structure containing 18 companies. The Companies were involved in manufacturing plant and machinery for a range of industries including aerospace, automotive, defence and construction. JRL performed long term plant contracts whereas S&C s activities were smaller scale machining projects. JRL employed 113 employees while S&C employed 26 and both operated from their own freehold premises in Wakefield, West Yorkshire. The remaining trading entities within Group Rhodes are continuing to trade as normal, and are unaffected by the Companies insolvency, their focus being on spares and services business (referred to as the Ongoing Businesses ). The business of the Group was funded with finance provided by the Bank, who were secured by way of fixed and floating charges over JRL s assets and subject to cross-guarantees over the Group companies. The circumstances giving rise to the administrators appointment During the last 12 months the Companies have suffered from delays and overruns on some of their major plant projects creating large contractual losses. These losses resulted in significant cash flow challenges throughout the wider group so the directors approached PwC to undertake a short term cash flow review. During the period of the review it became apparent that parts of Group Rhodes were under considerable creditor pressure; JRL had been unable to convert any large plant contracts for a period of 18 months and the majority of S&C s contracts were loss making. We undertook a review of the options to consider which strategy maximised the return to the Companies creditors. As a result of the ongoing cash pressures it became clear that a solvent restructure was not going to be financially viable, and controlled insolvencies of the Companies were likely to produce the best outcome for creditors. Pre-administration costs PwC s initial role was to advise the Companies and the Bank on their respective options. When it became clear that insolvency of the Companies was inevitable, PwC additionally worked with the Companies directors and their legal advisers in preparing for administration. This work included: Implementing a clear action plan with key milestones which has helped us deliver the administration strategy; Developing a communications strategy for employees, suppliers and customers; Obtaining management cooperation and agreeing licence terms with the Ongoing Businesses for the completion of the remaining plant contracts in the administration; and Liaising with the Companies and their legal advisors regarding the necessary legal documentation for the appointment of administrators. The time and expenses incurred by PwC prior to the administration, remain outstanding. The payment of the unpaid pre-administration costs as an expense of the administration is subject to approval under Rule 2.67A IR86 and doesn t form part of our proposals, which are subject to approval under Paragraph 53 Sch.B1 IA86. It s our intention to seek approval for payments of these time costs and disbursements as an expense of the administrations. 5
To the best of our knowledge and belief, no fees or expenses were charged by any other insolvency practitioner. Details of pre-administration costs are shown at Appendix B. How we ve managed and financed the Companies affairs and business Employees JRL Immediately on appointment 77 employees were assigned to the Ongoing Businesses. Two employees were required to support discussions on a significant contract and these individuals have been retained by the administrators on fixed term contracts to facilitate the completion of the project. One other employee has been retained by the administration to support completion of the remaining contract for one of the Group companies, BEL. The costs associated with his employment will be recovered from this company on completion of the contract. Unfortunately, the remaining 33 employees were made redundant with immediate effect. S&C All the employees of S&C were employed directly. Immediately on appointment 25 of the 26 employees were made redundant. One employee was retained until 7th October to support the administrators team with the sale of customer stock and work in progress. All employees of the Companies continue to be supported by our specialist team who have been able to provide specific advice on redundancy claims and processes. Properties JRL is the freeholder of Elm Tree Street, Wakefield WF1 5EQ, a site from which it operated, together with some of the other operating entities within Group Rhodes. S&C is the freeholder of a separate site known as Thornes Lane, Wakefield WF1 5RW. As the Ongoing Businesses also operated from the two premises, we have entered into licence to occupy agreements with them whilst they make arrangements to relocate to different locations. They are occupying parts of the sites, and are paying a market value licence fee which is proportionate to their percentage occupation of the premises. We consider that the Ongoing Businesses occupation of the sites is beneficial to the administrations for the following reasons: it would reduce the holding costs of otherwise empty premises, including for example business rates, security patrols and compliance with insurer s stipulations for unoccupied premises; and minimising the general decline in value which property can suffer, as a result of being vacant. In addition, the Ongoing Businesses are responsible for insuring the properties, paying the business rates and their staff will be available to assist the administrators in the collection of debtors (see further below). These licences to occupy in favour of the Ongoing Businesses are due to expire in May 2017, however there is an option that they can be extended for a further three months. We are in receipt of a monthly licence fee from the Ongoing Businesses of 7.5k in respect of the premises at Elm Tree Street, and 0.7k in respect of Thornes Lane. Prior to our appointment, parts of the Elm Tree site (known as the Resource Centre) were occupied by third parties, by virtue of existing licence agreements. As the Ongoing Businesses are occupying the premises whilst they re-locate, we considered it advantageous to the administrations for the other occupiers to remain, in consideration of monthly licence fees. In total, an additional eight parties occupy parts of the Resource Centre at Elm Tree Street on varying terms, the gross income of which currently amounts to 8,131 per month. We will consider the ongoing occupation of 6
these licensees to ensure that this does not constrain our property strategy and that the licence fee covers all associated costs. We are working with our agents to develop the optimum strategy and marketing process for maximising the properties value. We currently think this is most likely to be achieved once all licence to occupy agreements have expired and vacant possession can be obtained. Plant and machinery JRL and S&C s plant and machinery comprises a range of large engineering equipment, most of which are 60-70 years old. The machinery is integrated into the freehold property with high decommissioning and removal costs expected to be incurred by any potential purchaser. These removal costs, together with the age of the equipment has a significant impact on the valuation. We appointed RAA as our agents to undertake a valuation of the plant. Due to the age, value and removal costs, RAA have advised the preferred route is for all machinery to be sold via an onsite auction process in 9-12 months once the Ongoing Businesses have vacated the property. Stock Prior to the administration JRL has operated as the main trading entity in the Group. Supplies for the Group have been paid for by JRL and settled with other group companies through intercompany balances. As such, although the majority of the stock was accounted for as a JRL asset, it was likely that the ownership would be disputed by the Ongoing Businesses following our appointment. To remedy this, prior to appointment the directors took steps to acquire the stock at market value into the relevant entities. We have reviewed the transactions and can confirm that they were conducted on an arm s length basis and that the consideration received into the administration reflected the market value of the stock. These transfers are fully supported by an independent valuation. Our review has also highlighted that had this process not been completed prior to appointment the ownership of this stock would have been subject to dispute and would have resulted in additional cost to the administration. To date we have received 261k in respect of these stock transfers. The consideration received did not include the element of stock acquired in July and August. This stock had not been paid for by JRL and the ongoing businesses were unsure of the value to attribute to it due to the retention of title claims that could be received in the administration. We have now agreed the consideration mechanism for this stock and we expect to receive the outstanding balance shortly. This transaction will take into consideration that the majority of this stock would be subject to valid retention of title claims which the ongoing business will need to settle. Work in progress JRL We have reviewed the large plant contracts within JRL. There were two contracts which were at an advanced stage and where progression to completion could potentially result in significant recoveries for the administration. We discuss progress on these later in the report. All other plant contracts within JRL were loss making. As JRL had received all monies due under these contracts at the date of our appointment, we terminated these contracts immediately following the administration. JRL also had a small number of spares and services contracts. RAA had valued the WIP at 20k on the basis that these were completed. However, it became apparent that the costs of completion would have been disproportionate to the final revenue and therefore we agreed to abandon these orders. 7
Given the decision not to proceed with any of the JRL s orders, RIL advised that it may be willing to complete customer contracts via a series of novation agreements and associated purchase of WIP from JRL. These are being dealt with on an individual order basis and we expect to receive an element of consideration for the WIP on orders transferred. S&C All customers orders for S&C were also terminated immediately upon our appointment, as we were advised there was no value in completing any of these. Shortly following the appointment we made contact with all customers who had orders in progress with S&C to see if they would consider making an offer for the products that had been part engineered to their specification. In a number of cases the customers were willing to pay for the work completed to date and arrange for the orders to be completed elsewhere. From the sale of these goods in the administration we have realised 27k against an estimate to realise value of nil. Motor vehicles JRL had a fleet of 23 vehicles on site on the day of appointment, four of which were subject to finance. Two of the vehicles subject to finance were returned to the leasing company due to significant balances outstanding. Of the two remaining vehicles, one is being sold to a private buyer and the other to one of the Ongoing Businesses, which will realise a total of 4k. The remaining 19 vehicles were all owned by JRL and despite having high levels of mileage, they are in good repair. These vehicles have all been sold at auction realising 13k into the administration. Debtors JRL On appointment JRL had a debtor book of 307k in relation to 62 outstanding invoices, 92,546 of which is regarded as collectable and 214,862 is payable in respect of the two significant incomplete plant projects. Out of the remaining balance, 3,772 are aged trade debtors over 12 months and 5,123 is regarded as disputed. Group Rhodes Limited is providing assistance to us in the collection of monies owing to JRL. We are also awaiting transfer of funds from debtor receipts paid into the pre-appointment bank accounts. We have collected 3,349 to date against the collectable balance of 92,546. As noted above, we have also collected 261,326 in relation to the pre appointment stock transfers. S&C S&C had a debtor book of 284k in relation to 102 outstanding invoices (including 47,953 from JRL). The majority of the balances owed to S&C are still within their normal collection period and we have been informed by its directors that there will be minimal dispute from these debtors. To date we have collected 74,511 from the S&C s customers. The sale of WIP to customers has helped to protect S&C s debtor book and in some cases, secure payment of balances much earlier than the normal collection period. We have written to the customers chasing collection of the balances and will continue to do so until all balances are received. The incomplete plant contracts JRL is party to two large plant contracts with overseas customers. Based on the information received by the directors, we understand that one of these contracts is close to completion, however we are aware of some manufacturing issues with the machine at present. Prior to the 8
administration, JRL designed and manufactured modifications to address these issues, all of which are fully tested and ready for shipment. The customer has indicated that they wish to progress the contract to completion regardless of the administration. We have taken steps to commence negotiations to agree revised payment terms for the completion of the contract. Whilst discussions continue, we are working with the Ongoing Businesses to assess the material and labour cost required to complete the contract. Based on the information reviewed to date we consider these will be proportional to the overall realisation. With regards to the second contract, and based on communications JRL received prior to our appointment, the directors think that the customer no longer requires completion of this contract. However, the position is unclear and we are trying to enter into discussions with the end customer to confirm their position and recover any monies due in relation the work in progress. Beauford Engineers Limited The Bank s debt in JRL was secured by cross guarantees over a number of companies within the Group. To facilitate the administration of the Companies and proceed with new funding to the Ongoing Businesses, the Bank released the cross guarantees with the exception of S&C and Beauford Engineers Limited ( BEL ). As a result of the amounts owing to JRL under its intercompany balance and in the absence of a demand by the Bank under its cross-guarantee, we have continued to pursue BEL for this debt. BEL have one remaining contract which is set to realise 175k over the course of the next two months. We have been working with the management team at BEL to ensure that the recoveries from this contract are maximised which in turn will provide an improved return to JRL s creditors. As part of the arrangement with BEL, the administrators continued to employ a member of staff to support completion of the contract, the costs associated with this employee are payable by BEL. We understand that the Bank may at any time enforce its guarantee. However, maximising the return from this company either into JRL or directly to the Bank under its cross-guarantee reduces the Bank s total exposure and therefore fulfils the objective of the administration in either scenario. Connected party transactions Prior to administration, JRL has operated as the main trading entity in the Group. Supplies for the Group have been paid for by JRL and settled by other group companies through intercompany balances. As such, although the majority of the stock was accounted for as a JRL asset, it was likely that the ownership would be disputed by the Ongoing Businesses following our appointment. To remedy this, prior to appointment the directors took steps to acquire the stock at market value into the relevant entities. We have reviewed the transactions and can confirm that they were conducted on an arm s length basis and that the consideration received into the administration reflected the market value of the stock. The transfers are fully supported by an independent valuation from RAA. Our review has also highlighted that had this process not been completed prior to appointment, the ownership of this stock would have been subject to dispute. Post-appointment we have entered into license agreements with the Ongoing Businesses to occupy the premises for which we are receiving monthly license fees of 0.7k for Thornes Lane and 7.5k for Elm Tree Street, these licence fees reflect the market value pro-rated for the portion occupied. In accordance with SIP13, we are required to disclose any known connected party transactions that occurred in the period of two years preceding our appointment, in the period following our appointment or any proposed transaction. We will investigate any material connected party transactions to ensure that these were conducted on an arm s length basis. 9
Summary of pre-appointment intercompany stock transfers Purchaser Date of Purchase Date of Receipt Amount ( ) Rhodes Interform Limited 19 August 2016 14 September 2016 72,000 Craven Fawcett Limited 19 August 2016 14 September 2016 152,671 Hallamshire Engineering Limited 19 August 2016 14 September 2016 36,655 Total 261,326 Directors conduct and investigations As we said in our initial letter to creditors, one of our duties is to look at the actions of anybody who has been a director of the Companies in the three years before our appointment. We have to submit our findings to the Secretary of State for Business, Energy and Industrial Strategy within three months of our appointment. We also have to decide whether any action should be taken against anyone to recover or contribute to the Companies assets. If you think there is something we should know about and you haven t yet done so, please complete the relevant section of the attached claim form or write to me. This is part of our normal work and doesn t necessarily imply any criticism of the directors actions. Objective of the administration It was not considered possible to rescue the Companies as going concerns. Therefore, our strategy aims to achieve a better result for the Companies creditors as a whole than would be likely if they were wound up (without first being in administration). This is objective (b) as referred to earlier and we anticipate that this objective will be achieved for the following reasons: Upon our appointment, employees of JRL were transferred to the Ongoing Businesses under TUPE. Consequently the number and quantum of preferential and unsecured former employee claims was reduced; We have employed staff in order to facilitate the collection of JRL s debtor ledger, and to assist with the completion of two plant contracts in JRL; We have entered into licences to occupy both Companies premises with the Ongoing Businesses, in order to reduce the costs associated with empty properties and to enable us to consider an optimal strategy for the properties marketing and realisation. We think the above factors will allow us to achieve a better result for the Companies creditors than would have been the case if the Companies went into liquidation (without having first been in administration). 10
Secured creditors We don t think the Bank will be repaid in full. The Bank s lending to JRL (and guaranteed by S&C) as at the date of administration was as follows: What secured creditors are owed: JRL Debt Demanded Contingent liabilities Total The amounts due to the Bank are secured by fixed and floating charges over all of JRL s assets. 6,711,826 2,271,379 8,983,205 S&C S&C guaranteed JRL s debts to the Bank and provided security by way of fixed and floating charges over its assets. What we think the secured creditor could recover JRL (by virtue of the Bank s security over its assets and cross guarantee from S&C) 32% within 18 months This is secured by a debenture dated 5 October 2012. This security gives the Bank fixed and floating charges over all of JRL s assets, and is cross guaranteed by S&C, a wholly owned subsidiary of JRL. The cross guaranteed debt is secured by a fixed and floating charge debenture dated 28 December 2012. Estimated dividend prospects Preferential creditors (mainly employees) We think we ll be able to pay the preferential creditors in both Companies in full based on what we know currently. Unsecured creditors The prescribed part is a fund that has to be made available for unsecured creditors. It s paid out of net property. Net property is floating charge realisations after costs, and after paying - or setting aside enough to pay - preferential creditors in full. But it only has to be made available where the floating charge was created on or after 15 September 2003. The amount of the prescribed part is: 50% of net property up to 10,000 20% of net property above 10,000 Subject to a maximum of 600,000. The prescribed part applies in both of these cases as there are floating charges created after 15 September 2003. We think there will be a dividend for unsecured creditors of each of the Companies under the prescribed part, based on what we know currently. If we think the costs of agreeing claims and paying a prescribed part dividends will be disproportionate to the benefits in either of the Companies, we can apply for a court order not to pay the prescribed part to unsecured creditor of that Company. At the moment we don t plan to make such an application. 11
We think JRL s net property will be between 418,000 and 1.7m (dependant on realisations from company assets). This which means the estimated value of the prescribed part is between 76,200 and 334,300. This would give a dividend range of about 0.7 6.5% in the based on the estimate of unsecured creditors included in the statement of affairs. We think the S&C s net property will be 235,000 which means the estimated value of the prescribed part is 44,800. This would give a dividend of up to 5% based on the estimate of unsecured creditors included in the statement of affairs. These estimates depend on future realisations, administration costs and finalising claims from unsecured creditors. This guidance is only an indication. You shouldn t use it as the main basis for any bad debt provisions or debt trading. Apart from any prescribed part, we don t think there will be any dividend for unsecured creditors based on what we know currently. Ending the administration At the moment we think that once the objective of the administration has been achieved, we will distribute prescribed part funds to unsecured creditors after which the Companies will be dissolved. It is also possible that we will file a notice to place the Companies (either both or one of them) into Creditors Voluntary Liquidation, in order to pursue certain actions which are only available to Liquidators. We are unable to comment any further on this exit strategy so as to not to prejudice ongoing investigations. Administrators remuneration The Administrators propose that their remuneration be fixed based on the time spent by them and their staff in working on the administrations. As the Administrators have stated that there is no prospect of any return to unsecured creditors (apart from out of the prescribed part), it will be for the secured and preferential creditors to fix the basis of the Administrators remuneration. Prior to seeking approval for the basis of our fees to be fixed, we will make available a remuneration report for creditors by posting it on the website www.pwc.co.uk/jrsc. We anticipate that this will be posted to the website in December 2017. The remuneration report will set out the work undertaken to date by the Administrators and the extent and estimated cost of future work, together with our reasons for the suggested basis. 12
Our proposals for achieving the purpose of administration Our proposals for achieving the purpose of administration are as follows for each of the Companies. (i) (ii) (iii) (iv) (v) We ll continue to manage and finance the Companies business, affairs and assets from trading revenues and asset realisations, as we consider appropriate. We ll do this with a view to achieving a better result for the Companies creditors as a whole than would be likely if the Companies were wound up (without first being in administration). We may investigate and, if appropriate, pursue any claims the Companies might have. We ll also do anything else we think appropriate, to achieve the purpose of the administration or to protect and preserve the Companies assets or to maximise realisations or for any other purpose incidental to these proposals. If we think there will be money for unsecured creditors other than from the prescribed part, we may (but we won t have to) agree in principle the claims of unsecured creditors for confirmation by a subsequent liquidator or supervisor of a company voluntary arrangement. The costs of doing this may be charged to the administration, as part of our fees, depending on whether or not there will be a dividend for unsecured creditors other than the prescribed part. If we choose not to agree the claims in principle and there is money other than from the prescribed part for unsecured creditors, a subsequent liquidator or supervisor of a company voluntary arrangement will agree the claims. If we think there will be money for unsecured creditors other than from the prescribed part, we may (but we won t have to) ask the court to allow us to pay dividends to those creditors. If we choose not to ask the court for such an order and there is enough non prescribed part money for unsecured creditors, a subsequent liquidator or supervisor of a company voluntary arrangement / scheme of arrangement will pay dividends to them. We may use one or more exit route strategies to end the administration, but we re likely to choose the following option as being the most cost effective and practical in this case: (a) (b) If there aren t enough funds to pay a dividend to unsecured creditors other than by the prescribed part, once we ve finished our work we ll file a notice with the Registrar of Companies and the Companies will be dissolved three months later. Once we ve disposed of all the assets and finished our work, we ll put the Companies into creditors voluntary liquidation. If this happens, we propose that Toby Scott Underwood and Lyn Leon Vardy are appointed as joint liquidators and that any act required or authorised to be done by the joint liquidators can be done by either or both of them. Creditors may, before these proposals are approved, nominate a different person or persons as liquidator(s), in accordance with paragraph 83(7)(a) of schedule B1 to the Insolvency Act 1986 and Rule 2.117A(2)(b) of the Insolvency Rules 1986. (vi) We ll be discharged from liability in respect of any of our actions as administrators at a time set by the secured creditor or if a dividend has been or may be paid to the preferential creditors, at a time set by the secured and preferential creditors or at a time set by the court (vii) We propose that the unpaid pre-administration costs set out at Appendix B are approved for payment as an expense of the administration. As stated above, the payment of unpaid pre-administration costs as an expense of the administration is subject to approval under rule 2.67A of the Insolvency Rules 1986 and is not part of the proposals subject to approval under paragraph 53 of Schedule B1 to the Insolvency Act 13
1986. If you elect a committee it will be up to that committee to approve payment of the unpaid preadministration costs as an expense of the administration. But if there s no committee, then because we ve said we think the Companies don t have enough assets to pay anything to unsecured creditors other than via the prescribed part, we ll ask the secured creditor and preferential creditors to do so instead. It will be up to the creditors committee to fix the basis of our fees and Category 2 disbursements. But if there s no committee, then because we ve said we think the Companies don t have enough assets to pay anything to unsecured creditors other than via the prescribed part we ll ask the secured creditor and preferential creditors to do so instead. If creditors or the committee do not fix the basis of our fees and Category 2 disbursements, we may apply to the court to fix them no later than 18 months after the date of our appointment. 14
Statement of affairs We were given a statement of affairs of the Companies on 5 October 2016. They were signed by Alastair Cooper. Here are our comments on the statement of affairs: As is normal in a statement of affairs, there is no provision for the costs of realising the Companies assets or the costs of the administration. We haven t audited the information, however it should be noted that the Bank s exposure in the administrations is 8,983,379, not the amount quoted in the statement of affairs. The increase is due to the inclusion of outstanding performance bonds and guarantees which are caught under the cross-guarantee. Any cash at bank has been offset against the Bank s outstanding debt. To avoid disclosing commercially sensitive information, we make no comment on what the directors have put for the potential realisable values for the Companies assets We attach at Appendix [D1 and D2] copies of the statements of affairs. As required by law, we have included details of the names, addresses and debts of creditors (including details of any security held) in a separate document on our website www.pwc.co.uk/jrsc. We recognise creditors may want to contact each other to discuss certain aspects of the case. If you need more information to be able to do this, please get in touch with William Duxbury on 0113 289 4075 by telephone or in writing or emailing your request to creditorenquiries@uk.pwc.com with the name of the relevant Company in the title and including your name and your company name (if applicable) in the email. 15
Statutory and other information Joseph Rhodes Limited Court details for the administration: Full name: Trading name: Registered number: 00063294 Registered address: Company directors: Company secretary: Shareholdings held by the directors and secretary: High Court of Justice, Chancery Division, Leeds District Registry County Court Case 739 of 2016 Joseph Rhodes Limited Joseph Rhodes Limited Central Square, 29 Wellington Street, Leeds LS1 4DL (Formerly Belle Vue, Elm Tree Street, Wakefield, WF1 5EQ) Alastair Cooper, Charles Ian Ridgway, Charles Mark Ridgway, James Gascoigne and Raghunath Chandrasekaren Alastair Cooper Date of the administration appointment: 23 August 2016 Administrators names and addresses: Appointor s / applicant s name and address: Objective being pursued by the administrators: Division of the administrators responsibilities: As at 28/03/2016; 14000 Ordinary shares held by C M Ridgway 610000 Ordinary shares held by Trustees of C I Ridgway 40000 10% C Cum Red Preference shares held by C I Ridgway 30213 13% B Cum Red Preference shares held by trustees of Joseph Rhodes Limited Lyn Leon Vardy and Toby Scott Underwood of PricewaterhouseCoopers LLP, Central Square, 29 Wellington Street, Leeds, Ls1 4DL. Alastair Cooper - 8 Mansfield Road, Burley in Wharfedale, West Yorkshire LS29 7LQ Charles Ian Ridgway - Hawthorn Cottage, 2 Sandal Avenue, Sandal, Wakefield, West Yorkshire, WF2 7LR Charles Mark Ridgway - Central Square, 29 Wellington Street, Leeds, LS1 4DL Achieving a better result for the Company s creditors as a whole than would be likely if the Company were wound up (without first being in administration) The administrators may exercise any of the powers conferred on them by the Insolvency Act 1986 jointly or individually Whether and why the Administrators intend to apply to court under Section 176A(5) IA86: No The European Regulation on Insolvency Proceedings (Council Regulation (EC) No. 1346/2000 of 29 May 2000): The European Regulation on Insolvency Proceedings applies to this administration and the proceedings are main proceedings. 16
Statutory and other information Slater & Crabtree Limited Court details for the administration: Full name: Trading name: Registered number: 000223606 Registered address: Company directors: Company secretary: Shareholdings held by the directors and secretary: High Court of Justice, Chancery Division, Leeds District Registry County Court Case 738 of 2016 Slater & Crabtree Limited Slater & Crabtree Limited Central Square, 29 Wellington Street, Leeds LS1 4DL Alastair Cooper, Charles Ian Ridgway, Charles Mark Ridgway Alastair Cooper Date of the administration appointment: 23 August 2016 Administrators names and addresses: Appointor s / applicant s name and address: Objective being pursued by the administrators: Division of the administrators responsibilities: As at 28/03/2016; 2,500 Ordinary Shares held by Joseph Rhodes Limited Lyn Leon Vardy and Toby Scott Underwood of PricewaterhouseCoopers LLP, Central Square, 29 Wellington Street, Leeds, Ls1 4DL. Alastair Cooper - 8 Mansfield Road, Burley in Wharfedale, West Yorkshire LS29 7LQ Charles Ian Ridgway - Hawthorn Cottage, 2 Sandal Avenue, Sandal, Wakefield, West Yorkshire, WF2 7LR Charles Mark Ridgway - Central Square, 29 Wellington Street, Leeds, LS1 4DL Achieving a better result for the Company s creditors as a whole than would be likely if the Company were wound up (without first being in administration) The administrators may exercise any of the powers conferred on them by the Insolvency Act 1986 jointly or individually Whether and why the Administrators intend to apply to court under Section 176A(5) IA86: No The European Regulation on Insolvency Proceedings (Council Regulation (EC) No. 1346/2000 of 29 May 2000): The European Regulation on Insolvency Proceedings applies to this administration and the proceedings are main proceedings 17
Receipts and payments accounts Joseph Rhodes Lim ited - in Adm inistration Statem ent of Affairs Fixed charge 23 August 2016 to 17 October 2016 ( ) Receipts 3,500,000 Freehold property - Licence fees 8,010.7 7 7 2,37 8 Tangile fixed assets - 3,57 2,37 8 8,010.7 7 Pay m ents Fixed charge balance 8,010.7 7 - Floating Charge Receipts Book debts 150,000 Trade debtors 3,348.50 Intercompany stock transfer 261,326.02 Motor Vehicles 13,239.69 3,27 8 Cash - 50,000 Fixed assets - 1,300,000 Long term projects - 234,301 Related undertakings - Bank interest received gross 6.15 1,7 37,57 9 27 7,920.36 Pay m ents Bank Charges 122.34 Wages 7,27 6.83 7,399.17 Floating charge balance 27 0,521.19 Vat Control Account 2,100.00 Funds in hand* 280,631.96 *Fu n ds h eld in in ter est bea r in g ba n k a ccou n t 18
Slater & Crabtree Lim ited - in Adm inistration Statem ent of Affairs Fixed charge 23 August 2016 to 17 October 2016 ( ) Receipts 7 00,000 Freehold property - Licence fees 666.66 7 00,000 666.66 Pay m ents - Fix ed charge balance 666.66 Floating Charge Receipts Sale of work in progress 26,646.53 202,07 3 Book debts 7 4,511.27 52,099 Cash at bank - 40,000 Tangible fix ed assets - Bank interest receiv ed gross 2.00 294,17 2 101,159.80 Pay m ents Wages and salaries 3256.80 Bank Charges 15.00 3,27 1.80 Floating charge balance 97,888.00 Vat Control Account 5,462.64 Funds in hand* 104,017.30 *Fu n ds h eld in in ter est bea r in g ba n k a ccou n t 19
Appendix A: Group structure 20
Appendix B: Pre-administration costs The following costs were incurred before our appointment as Administrators but with a view to the Companies entering Administration. It is proposed that the unpaid costs will be paid as an expense of the Administration. Such payment is subject to approval under Rule 2.67 of the Insolvency Rules 1986 and isn t not part of our proposals, which are subject to approval under paragraph 53 Sch.B1 IA86. Unpaid amount ( ) Fees charged by PwC to JRL 41,885.25 Fees charged by PwC to S&C 15,310.75 Expenses incurred by PwC for JRL 21,277.31 Expenses incurred by PwC for S&C 6,422.67 Total 84,895.98 Paid amount ( ) Expenses incurred by PwC relates to the legal fees for advice on the assignment of employees to the Ongoing Businesses, drafting the licence agreement between the Companies and the Ongoing Businesses and drafting the documentation for the appointment of the administrators. Joseph Rhodes Limited - in administration (pre-appointment) Analysis of time costs for the period from 1 Aug 2016 to 22 Aug 2016 Aspect of assignment Partner Director Senior Manager Manager Senior Associate Total hours Time cost Average hourly rate Strategy & Planning 7.00 4.50 43.85 3.15 17.55 76.05 31,034.50 408.08 Accounting and treasury - - - - 0.40 0.40 76.00 1 90.00 Statutory and compliance 1.00 - - - 1 2.65 13.65 3,889.00 284.91 Employ ees & pensions - - - 1 7.1 5 5.1 0 22.25 6,885.75 309.47 Total for the period 8.0 4.5 43.9 20.3 35.7 112.35 41,885.25 372.81 Brought forward at 31 Jul 2016 31.95 12,678.75 Slater & Crabtree Limited - in administration (pre-appointment) Analysis of time costs for the period from 1 Aug 2016 to 22 Aug 2016 Aspect of assignment Director Senior Manager Manager Senior Associate Total hours Time cost Average hourly rate Strategy & Planning 1.50 18.15 1.55 10.85 32.05 11,868.00 370.30 Statutory and compliance - - - 2.1 0 2.10 546.00 260.00 Employ ees & pensions - - 7.35 1.90 9.25 2,896.75 313.16 Total for the period 1.5 18.2 8.9 14.9 43.40 15,310.75 352.78 Brought forward at 31 Jul 2016 7.20 3,132.00 21
Summary of our pre-administration time Strategy and planning Implementing a clear action plan with key milestones to deliver the administrations. Developing a communication strategy for suppliers and customers. Obtaining management co-operation an agreeing licence terms to support the administrators in the completion of the remaining plant contracts. Accounting and treasury Initial set up of post administration bank accounts. Statutory and compliance Liaising with the companies and their legal advisors regarding the necessary legal documentation for the appointment of the administrators. Employees Liaising with our lawyers and the company s directors to facilitate the assignment of employees to the ongoing businesses. This was required to ensure that the assignment was fully compliant with employment law and mitigated the liabilities of the companies. Developing a communication strategy for the employees on appointment of administrators. Drafting initial notification to those required under IR86. 22
Appendix C1: Summary of the statement of affairs for Joseph Rhodes Limited 23
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Appendix C2: Summary of the statement of affairs for Slater & Crabtree Limited 26
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