CVA
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CVAs can effectively implement group restructuring
Tim and a fellow director managed a group of companies, including subsidiary that had run up losses of ?9 million over a six-year period. They wished to continue the business but were unable to fund the full extent of the losses. The subsidiary held intellectual property rights, charged to the bank and others, which were fundamental to the whole group's business. A winding up petition had been issued against the subsidiary and it looked as if it had reached the end of the road. Tim spoke to his bank manager who suggested he contacted us.
We did not feel that liquidation was a constructive way forward. It would have meant the closure of the business, loss of employment and poor recoveries for creditors. We therefore looked for a more creative solution. We suggested a CVA that provided for one of the other subsidiaries within the group to acquire the intellectual property, funded by the bank and the other secured creditors who were repaid part of their debt in the loss making subsidiary as a result of the sale. New finance was obtained to enable the purchasing subsidiary to also acquire the remaining assets at going concern valuations, which in turn provided funds, to be paid into the CVA for distribution to the unsecured creditors.
Following implementation of this plan, Tim had an on-going business free from past debt, a happy bank manager and creditors with a better recovery.
"If you have a creative solution, a CVA can be used to gain the broad creditor support for it"
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