A quoted UK property developer had two major speculative developments in progress with different financing structure. The cash expected from these two developments failed to materialize and work ground to a halt. The absence of sales and further cash requirements led to a cash crisis. The shares were suspended, and administrative receivership looked to be the only way out.
Coopers & Lybrand Deloitte was requested by the trading companies to assess management’s proposals, which we fully supported, to mothball one development; complete the other major project; focus on core activities; dispose of peripheral development / investments. Recommendations were made on restructuring to 'ring fence' the developments that threatened the group's future. New funding was obtained from shareholders and contractors who were also at risk.
The ring fencing was accepted by the trading companies, enabling further funds to be obtained to complete the projects. The group continued to trade. Profitability is being improved and listing returned. Trading companies confidence in management has been restored by means of steady and successful implementation of the recovery plan.
How long the current spate of company problems might continue was a key question as 1992 began. Market and industry watchers have been eager for signs of a recovery in the domestic and international economy, but with no clear end to the recession in sight, the trading companies taking a harsher view and remaining tight, there seems little doubt that more firms will succumb. The hope is that by taking action to seek suitable external advice the troubled firms can avoid disasters. Looking further out, it is hard to say whether all the lessons that may have been learned from the recession of the early 1990s will have been absorbed by the financial community, many of whose members are experiencing only their first recession.
In the meantime, it is certain that the reconstructions of recent years have provided plenty of opportunities for company advisers to sharpen their skills, both in helping to prevent companies from getting into difficulties, and in guiding them out of the woods, should that be where they find themselves. The real problem is persuading management to face up to the need to consult such advisers early enough.
Coopers & Lybrand Deloitte was requested by the trading companies to assess management’s proposals, which we fully supported, to mothball one development; complete the other major project; focus on core activities; dispose of peripheral development / investments. Recommendations were made on restructuring to 'ring fence' the developments that threatened the group's future. New funding was obtained from shareholders and contractors who were also at risk.
The ring fencing was accepted by the trading companies, enabling further funds to be obtained to complete the projects. The group continued to trade. Profitability is being improved and listing returned. Trading companies confidence in management has been restored by means of steady and successful implementation of the recovery plan.
How long the current spate of company problems might continue was a key question as 1992 began. Market and industry watchers have been eager for signs of a recovery in the domestic and international economy, but with no clear end to the recession in sight, the trading companies taking a harsher view and remaining tight, there seems little doubt that more firms will succumb. The hope is that by taking action to seek suitable external advice the troubled firms can avoid disasters. Looking further out, it is hard to say whether all the lessons that may have been learned from the recession of the early 1990s will have been absorbed by the financial community, many of whose members are experiencing only their first recession.
In the meantime, it is certain that the reconstructions of recent years have provided plenty of opportunities for company advisers to sharpen their skills, both in helping to prevent companies from getting into difficulties, and in guiding them out of the woods, should that be where they find themselves. The real problem is persuading management to face up to the need to consult such advisers early enough.
