Creditors owed money by a failed Midlands company face an £8m black hole, it has been revealed. Administrators from BDO handling the affairs of Cartwright King Solicitors have reported that the company’s debts far outstrip the money that has been recouped in the last six months.

The firm, which operated from 11 offices and was a leading legal aid provider, was put into administration just before Christmas and its assets and staff transferred in a pre-pack deal to AWH Acquisition Corp. The administrators report confirmed that the full £200,000 has been paid which had been agreed as part of the acquisition deal.

But that figure does not even cover the administrator’s costs, let alone start to pay the estimated £8.22m owed. The biggest creditor is the firm’s bank (unnamed), which was owed £5.1m when Cartwright King went under. This consisted of a term loan, a coronavirus business interruption loan, recovery loan and an overdraft facility.

The report warns that any distribution to the bank will be dependent on the costs of the administration and the level of asset realisations, and at this stage it is ‘uncertain’ whether there will be any distribution, despite the bank’s status as a secured creditor.

HM Revenue & Customs is owed more than £1.3m through unpaid VAT and employee deductions, while there is also a potential claim for monies owed to two former employees.

The situation is particularly bleak for unsecured creditors, whose claims had been estimated at £878,000 six months ago but have now escalated to be worth £1.75m. Administrators confirm there is ‘no prospect’ of unsecured creditors receiving a dividend other than the prescribed part.

Pre-administration costs and expenses, which were incurred as part of the sale to AWH, total more than £233,000. These increased since the original estimate as legal disbursements and PR media costs were not factored in then.

During the administration period, time costs of almost £175,000 have been incurred consisting of 506 hours at an average rate of £345 per hour. These costs were ‘essential in ensuring optimal realisation of assets for the benefit of the company’s creditors as a whole’, the administrators said. 

 

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