Unsecured creditors owed a total of £7.1m by collapsed Midlands firm Challinors are likely to receive nothing, the partnership’s administrators have concluded.
In a report to members and creditors, Baker Tilly also acknowledges how much more difficult it has become for law firms to borrow money in the wake of a number of high-profile collapses which have seen banks and other creditors lose millions.
Challinors was ‘adversely affected’ by the collapse of Cobbetts in February this year and other ‘well-publicised failures which made the refinancing of the business extremely difficult’, the report declares. This effectively torpedoed a financial lifeline, as an unnamed legal consultancy prepared to pump £2.5m into the ailing business became ‘increasingly frustrated’ and eventually withdrew.
Delays in the progress of an alternative business structure licence application due to Challinors’ failure to complete paperwork also helped seal the firm’s fate, Baker Tilly says.
Allied Irish Bank, the only secured creditor, is owed £4.5m. The biggest unsecured creditors include HMRC (£1m), South Tyneside Borough Council Pension Fund (£489,000), a food supplier understood to be owed £400,000 and Aberdeen Property Investors (£392,189).
The administrators state that unsecured creditors are entitled to submit claims within the Individual Voluntary Arrangements of the firm’s current partners. The shortfall to Allied Irish Bank will also form the bank’s claim in the IVAs.
Baker Tilly has so far charged more than £250,000 in fees for conducting the administration, at an average charge out rate of £222.98 an hour.
Challinors went into administration in August, with the loss of 46 jobs, after attempts to sell it as a whole failed. Elements of the business were acquired by a number of other firms, including Cartwright King and Clarke Willmott.