Executive Serviced Apartments Ltd

Pre-pack Sale


When Executive Serviced Apartments Ltd fell into an uncertain financial position, the company were referred to Quantuma to assist in a pre-pack sale

Background

Executive Serviced Apartments Limited is a business established in 2004 with the principal activity of letting serviced apartments to large corporate companies to house their executives. The company has a head office in Newbury and the current property roster incorporates 274 apartment suites. Their liabilities included £1 million in secured lending and £1.6 million in unsecured liabilities.

Issue

Having secured additional finance from Santander Bank Plc in 2014, the company continued on its growth path; albeit incurring losses as the expansion created growing pains within the business. 

In the latter part of 2018, Santander Bank Plc expressed concerns regarding the company’s ability to service its lending and took steps to place the company into its Recovery Department. This ultimately resulted in another firm of insolvency practitioners being introduced to the company’s board to manage payments and advise Santander as regards its options.

Prior to this event, the company’s board had recognised the need for further external funding and had engaged in a detailed process of trying to find a prospective purchaser for the company on a solvent basis. They engaged with an entity called Orchard Apartments Limited who began undertaking detailed due diligence on the company and progressing discussions as regard a solvent transaction. 

By January 2019, Orchard Apartments Limited had concluded that they no longer wished to progress with a solvent purchase of the company’s shares, however they entered into an agreement to take an assignment of Santander Bank Plc’s security and thus became the secured creditor to the company. As a result of the transaction to assign the company’s secured liability, the company lost its overdraft facility and was only able to operate on a cash basis. Orchard Apartments Ltd retained an interest in acquiring the company’s business/assets by way of a pre-pack sale.

With the company’s uncertain position, the directors sought advice from accountant Mark Lane of Lane Monnington Welton who referred the company to us. 

Outcome

We quickly assessed that the company was likely to require entrance into Administration with a view to its business/assets being disposed of by way of a pre-pack sale to preserve on-going contracts and mitigate the crystallisation of potentially significant further liabilities. As a result the company’s directors filed a 1st notice of intention to appoint administrators to enable the company’s business/assets to be valued, marketed and disposed of. Further notices of intention were then filed to enable negotiations to continue in connection with a proposed sale of the company’s business/assets.

One of the company’s assets was a 50% Joint Venture (JV) stake in an entity called House of Fisher ESA Limited. Upon review it was apparent that were the company to enter administration. In light of the parlous position and risk of the company’s shares being devalued to par value, negotiations were continued with the JV partner resulting in the JV stake being sold to the JV partner for the consideration of £146,500. The consideration in respect of the shares was paid to Orchard Apartments Limited in full, under the terms of their security. A 4th notice of intention to appoint was then filed to enable final negotiations to conclude in respect of a sale of the company’s business/assets to Orchard Serviced Apartments Limited.

The pre-pack process resulted in the preservation of 90 jobs and mitigation of potentially significant future claims from landlords in respect of the 274 properties. We were able to ensure significant repayment to the secured lender and return of funds to unsecured creditors by way of the prescribed part. We were also able to preserve and facilitate fulfilment of future customer bookings.



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