Restructuring & Insolvency

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1 Restructuring & Insolvency

2 Welcome We have a leading reputation for helping regional small to medium sized companies and owner managed business through the good times as well as the bad times. However, more recently, clients have come to us with a whole manner of different legal and commercial issues which require specialist input from a number of lawyers across our firm. The common denominator in these scenarios is the current state of the economy and the financial distress this causes. This creates the need for fast, proactive advice to manage the situation and key stakeholders in order to conclude a successful outcome for the business. We have responded to these special, and often difficult, conditions by forming the Restructuring & Insolvency Team. This comprises industry experts who are experienced in working with business owners, directors and other professional services to address short term issues or longer term chronic trading difficulties. Our objective is to respond quickly by taking control of situations and managing them to a successful outcome for our clients. We resolve difficulties by working with people involved in any of the following situations. Stakeholder management: n banking and venture capital firm relationships; n creditors; n employees and trade unions; n refinancing; and n restructuring secured debt. Situation management: n restructuring and reorganising businesses; n resolving disputes; and n formal insolvency scenarios. Distressed asset investments: n buying struggling businesses; n creating investment opportunities; and n working with specialist turnaround investors. We combine our expertise to provide swift and practical solutions to each situation.

3 There are varied and numerous factors which influence the severity of the situations that require our specialist advice. We treat each situation individually by addressing its unique issues with pragmatic and commercial solutions. The ways that we can help are diverse and there are many instances when clients are clear that they have a problem, but are unsure of any solution. Too many businesses which go into formal insolvency could have avoided their fate had they sought financial or restructuring solutions earlier. This is why we are always more than willing to have an initial discussion without charging for our time. Not seeking financial or restructuring help early can restrict your options later on when creditor pressure increases. Here are some more ways that we can help: Banking Relationships n reviewing bank facility letters and mortgage documentation to understand the value of the security the Bank holds and the implications of any breaches of banking covenant; n using our extensive network of contacts to source finance opportunities (including invoice discounting and asset based lending/lease finance as well as more opportunities to move your clearing bank account); and n quickly producing legal mortgage/debenture security on behalf of creditors who are concerned about a particular level of customer risk and consider the insolvency law implications of taking security at this stage. Restructuring and reorganisations n balance sheet restructuring; n share sales of solvent (but financially stressed and distressed) businesses; n dealing with the investment requirements of incoming investors; n seeking Turnaround Finance and working with distressed funds/accelerated mergers and acquisitions advisers to achieve a business sale of stressed and distressed businesses; and n acting for buyers in the context of a pre-packaged administration sale. Resolving disputes n debt recovery services for Insolvency Practitioners including bespoke recovery of construction debt ledgers; n bankruptcy and insolvency litigation service; n links to litigation funders and After The Event insurers to successfully pursue insolvency litigation; and n unique monitoring services of our clients debtor customers using a real-time online alert system to inform them of problems in their customer base.

4 Managing employees and trade unions n offering our employment protection insurance, Mi Shield, providing a combination of our employment services for an all inclusive fixed cost, which includes tribunal costs and awards; and n TUPE advice and the implementation of consultation/redundancy schemes. Property investments n dedicated specialists to deal with insolvency related disposals of property assets for insolvency practitioners; n introducing cash rich clients looking for opportunities to buy distressed property assets; n services such as security reviews of property security for banks and other lenders; and n insolvency advice and training to commercial landlords in relation to their insolvent tenants. Insolvency and turnaround situations n advice for Insolvency Practitioners in relation to all aspects of formal insolvency situations; n acting for administrators in the sale of businesses and assets through pre-pack administration procedure and sale through trading administrations; n advice for boards of directors on directors duties during periods of financial distress to avoid personal liability; n advice in relation to supply chain insolvency; n working with an extensive network of trusted partners to provide and implement informal turnaround solutions (i.e. interim Financial Directors, turnaround practitioners, distressed funds, corporate financiers, insolvency practitioners, bank advisory teams). We will do whatever it takes to avoid insolvency wherever possible, although it might ultimately be the casethat turnaround is only achievable by using an administration, for example; and n overall high level reorganisation and restructuring advice focussing on restoring the balance sheet to an acceptable and stable position (divesting non-core and unprofitable assets, refinancing to leverage assets, negotiating with lenders, realising property by way of sale and leaseback, accessing pension fund cash, etc.).

5 Case Studies The rescue and community ownership restructure of Darlington Football Club On 3 May 2012, approximately 5 months after our initial involvement started, we successfully rescued the club out of administration by completing a deal to purchase the entire business assets of the football club ensuring its continuation as a going concern. The Buyer deployed an innovative fund-raising scheme utilising crowd-funding as an opportunity the local community of Darlington to raise funds of circa. 300,000 in approximately 14 days. We also developed an entirely bespoke concept of using a community interest company to work in parallel with the football club to deliver maximum community impact with amendments to articles of association to ensure a 15% ownership cap on the share capital. This was a complex case with many stakeholders involved, including the former Chairman of the football club, the administrators, the town MP, the leader of the council, the editor of the local newspaper, key representatives from the various fan-groups, the football association and others. By getting involved early on in the rescue we were able to deliver significant results for our client. Retaining value when in administration Powerdial Services was a very well managed business, with a first class client base and an excellent reputation in the UK IT Sector. However they were faced with some complex business issues. The parent company (ISD Group Plc) had gone into administration. We needed to act rapidly to support a rescue scenario involving a sale of the business and assets, as well as shares of Powerdial Services. It was vital Powerdial remained intact. There were overseas investors involved which added a significant layer of complexity to the deal. We needed their finances to facilitate the transaction and there were some difficult negotiation points which we had to address. To protect the business we established new bank security covenants. Stepped in to stop staff from the subsidiary who had left the business, trying to take customers with them. By protecting the ongoing trade of the business, we secured a future for the remaining staff and avoided letting its customers down. As a result, our team ensured a co-ordinated approach was made to tackle the issues that Powerdial Services faced and we brought about a successful conclusion. Saving jobs and business investments We were approached by an entrepreneurial investor who had injected over 1m of funds into a manufacturing business secured by a debenture which pre-dated the Enterprise Act The business had consistently traded poorly and there was a call for further cash from the investor to stabilise cash flow. The investor was unwilling to compound his losses and wished to unwind his position. We were able to quickly implement an appointment of an administrative receiver who sold the business under a prepack receivership sale to a local competitor. This resulted in nearly all of the employees jobs being saved and a mechanism being implemented to enable our client to have a significant element of his investment repaid through the realisation of assets. Understanding the Banks supporting your future An organisation s UK Bankers were concerned that planned restructuring activities of the company s overseas parent would have a detrimental impact on the UK Bank s position. By evaluating the proposed activities we advised the company of the Bank s perceived issues and thereby helped to alleviate those concerns. This enabled the Bank to agree to the restructuring plan. This secured support from the Bank and ultimately the company s ongoing position. Acquisition results in growth for Express Engineering Our quick response to local firm, Express Engineering, on the acquisition of the North Yorkshire precision components firm, Burdon Limited (which went into administration in August 2013) helped save over 70 jobs and increase Express capacity. The acquisition formed a key part of Express growth plans. This was an important transaction which allowed Express to take on the 76 strong, skilled workforce and acquire the manufacturing equipment at the Stokesley Industrial Estate Factory. This included a virtually completed, freehold 25,000 sq. ft factory which Express intended to finish to accommodate further expansion of the Stokesley operations. The assets acquired were vital to enabling Express to expand services and reduce lead times to existing Express customers. It was therefore important to secure the deal and agree the sale terms as quickly as possible to ensure that the opportunity was not lost. We worked with Express and its financial advisers pwc over an intense few days. We were able to achieve a swift agreement with Burdon s administrators within the very short time frame that was dictated by Burdon s cash flow position.

6 What our clients say about us Our team are recognised for expertise in corporate restructuring advice. Particular focus on advising directors whose businesses are facing financial difficulties. Our industry knowledge is described as Absolutely brilliant, they can handle it when projects get complicated and they impress on technical details. Chambers and Partners 2014 Whenever I met with Muckle LLP it was like meeting with businessmen who happened to also be lawyers. They understood the business needs. In my dealings with Muckle, I found them to be a vibrant, professional team. The team at Muckle and it was very much a team is outstanding. From start to finish, everyone I worked with was professional and dedicated and delivered on what they said they would. They were excellent every step of the way. Paul Farn, Managing Director of Powerdial Services Limited

7 I am delighted to see that Muckle LLP has launched its Restructuring & Insolvency Team which aims to provide North East based companies with innovative business rescue and turnaround solutions. It is important that organisations operating in the turnaround community work together to drive value for all stakeholders from distressed situations. Through a combination of being proactive in identifying opportunities for turnaround investment and moving quickly to conclude deals, I am sure that the Restructuring & Insolvency Team will have a significant impact on the business rescue community for years to come. Jamie Cons table, Chief Executive Officer at Rcapital Partners LLP

8 Key Contact Andrew Cawkwell Partner and Head of Restructuring & Insolvency Team Tel: Mob: He is straight-talking and forthright and offers clear, precise and articulate guidance, and is very agile in the solutions that he provides. Clients praise his ability to produce straight and clear responses as well as his capacity to handle complex cases. Chambers and Partners 2014 Muckle LLP Time Central, 32 Gallowgate, Newcastle upon Tyne, NE1 4BF, DX Tel: Fax: Certificate No. EMS