A Lifeline for Business R3 - SPG Company Voluntary Arrangements Eric Walls & Wayne Harrison Insolvency Practitioners KSA Group Ltd

A Lifeline for Business R3 SPG KSA will present on the use of Company Voluntary Arrangements ("CVA") in turnaround situations and will focus on the practical issues of establishing the suitability of CVAs in particular situations, getting a proposal off the ground, the negotiation with stakeholders and creditors, legal and technical issues affecting the same.

A Lifeline for Business R3 SPG Establishing whether CVA is appropriate All enquiries filtered by suitably trained advisors Looking for struggling but viable companies Currently insolvent or near insolvent Under pressure, management failing Need to restructure but an underlying viable business Meet with board on site – Assess ALL options in detail – Report in writing as to recommended solutions

A Lifeline for Business Formal and Informal Options Available? Trade out (TTP) + refinance: credit crunch = not easy, tougher HMRC attitude Trade sale – Enough time for due diligence, high gearing and creditor threats ? Administration / pre pack ? SIP 16, TUPE and other relevant business issues Liquidation – often the only option Administration followed by CVA ? CVA may be suitable

A Lifeline for Business CVA Candidates? Suitability - The five key questions. Established marketplace / niche within that marketplace Potential to grow and prosper given finance and management needed Systems or management fundamentally in place or easily implemented Management needs determination to succeed Willingness to change and work together with advisors

A Lifeline for Business KSA Group CVA process Deal making & structuring supplies with creditors Creditor liaison - contact /talk to every creditor and explain process and timetable Enable structure for recovery, remove people /costs Framework to introduce financial products /liaise with the bank and finance providers Extensive detailed financial forecasting

A Lifeline for Business KSA CVAs Company Voluntary Arrangement – High levels of due diligence – Compare all options and assess viability – Build detailed statement of affairs – Build detailed financial models – Stress testing / “What if“ discussions with board – Set out strategies to board, bank and advisors – Agree CVA with board and then propose to creditors

A Lifeline for Business CVAs, Banks and Pre-Packs CVA has huge flexibility and power – Can control winding up petitions with case law and aggressive counter legal action – Consensus always best though! Many advisors and bankers not aware of the CVA approach – talk to bank with the proposed plan in advance – CVA impact on bank remedies and securities? Banks current attitude to pre-packs to incumbent directors / shareholders – CVA becoming more acceptable now?

A Lifeline for Business CVA Deal Structure? Generally we set a realistic and fair level of future net profits to be paid into scheme Typically five year phased deal with monthly contributions Bank capital repayments frozen or continued? – Detailed cashflow determines what is required, but will the bank agree? Seek new ABL finance or investment if needed RPO picks up claims for redundancy

A Lifeline for Business CVA Deal Structure (cont.) Need to strengthen the board? – Improved financial and management reporting Determine various unwanted lease / HP contracts? – Re Doorbar and Park Air Services – Standstill agreement on wanted lease/ HP deals Exit unwanted property?

A Lifeline for Business Benefits for creditors? Trade creditors get dividend plus ongoing trading Retain a future customer Supervisor oversees CVA Business must pay future taxes on time – Default if not paid HMRC will closely monitor future payments and returns Return generally better than terminal Consensus and involvement

A Lifeline for Business Benefits for Board/ Members Still managing the business No PG called up? Remain in control with improved management & reporting controls Trade out of troubled waters Enhanced return to creditors who had faith in the company

A Lifeline for Business CVA Benefits CVA is a powerful consensual solution Avoid asset meltdown Avoid usual loss crystallisation for secured creditors Restructure business aggressively. Review all overheads and remove unnecessary costs

A Lifeline for Business Monitoring/Implementation of CVA Monitoring contributions Provision and reviewing accounting information Unusual conditions / modifications Creditor communication – post CVA liabilities Compliance / Statutory returns

A Lifeline for Business Practical Compliance issues Fair treatment of all parties in the CVA Notice / Excluded creditors? Casting of votes at creditors’ meetings Landlord’s vote, a Chairman’s nightmare? Responding to requests for information

A Lifeline for Business Ongoing compliance issues Summoning meetings of creditors Payments of dividends