Overview:
UK Freight Services Ltd is a Bristol-based freight and logistics business which entered administration following the loss of its membership of the Pall-Ex pallet network.
The company had previously undergone a restructuring, with the director acquiring the business through a pre-pack administration. However, a dispute with Pall-Ex ultimately led to the termination of its network membership, putting significant pressure on the business and its ability to continue trading.
The Circumstances of Administration
The dispute with Pall-Ex was a major factor in the company’s financial difficulties. Once its network membership was terminated, concerns were raised by the company’s secured lender, Novuna.
The business was also operating in a challenging sector, with rising fuel and vehicle costs, pressure on margins and difficulties around driver availability. With the company’s trading position worsening, the directors took steps towards an administration.
Our Approach
Following our appointment, David Kemp, administrator at Exigen Group, focused on preserving and maximising value for stakeholders wherever possible. Before the administration, his team carried out detailed pre-appointment planning, including:
- Reviewing and valuing the company’s assets
- Assessing the available recovery options
- Managing the collection of outstanding book debts, one of the company’s most significant assets
- Planning for an orderly wind-down to maximise creditor returns
Although the business was not able to continue trading, the pre-appointment work meant that we were able to move quickly and focus on maximising recoveries.
Granting a Licence to Occupy
An important part of this case involved a third-party business operating as a sub-tenant from the company’s premises. Without access to the premises, the sub-tenant’s ability to continue trading could have been affected. To avoid unnecessary disruption, we granted a licence to occupy, allowing the business to remain in the premises while it made alternative arrangements.
This situation shows how an insolvency can have an impact not just on the company, but also the customers, suppliers, landlords and other businesses connected to the company, even if they are financially stable.
Businesses should regularly review the key relationships they rely on and consider what would happen if one of them suddenly changed or had to close down. Having a plan in place can help reduce disruption and give the business more options if something unexpected were to happen.
The Outcome
The asset realisations are expected to be sufficient to repay the secured creditors in full, as well as a distribution to preferential creditors, including employees and HMRC.
The administration has achieved a strong recovery from a business which had been under significant pressure, and allowed a connected business to continue trading from the premises during the process.
Key outcomes include:
- Pre-appointment planning allowed the administration to be implemented quickly.
- Outstanding book debts were identified and recovered, which was one of the most significant assets.
- A licence to occupy allowed a connected sub-tenant to continue trading while alternative arrangements were considered.
- The secured creditor is expected to be repaid in full.
- A distribution is expected to be available to preferential creditors, including employees and HMRC.
Administrator Comment
David Kemp of Exigen Group said:
“This case shows how quickly a business can be affected when an important commercial relationship breaks down. The company was heavily reliant on its Pall-ex network, and once that relationship ended, it had a huge impact on the wider business.
Businesses should be thinking about the relationships they rely on to operate. If a key customer, supplier or network was suddenly no longer available, would you still be able to operate?
You can’t always prevent these things from happening, but having a plan and understanding your options can make a big difference and help you to adapt quickly.”