Commercial Estates Group administration: Taxpayers and creditors in line to lose over £4m after pre-pack sale
Taxpayers and creditors are set to lose out on more than £4m as a result of the pre-pack administration of property giant Commercial Estates Group.
CEG, which is involved in several major real estate schemes in Yorkshire including the Kirkstall Forge and Temple Works developments in Leeds, entered administration last month with KRE Corporate Recovery appointed to lead the process.
The company had employed around 120 people, with offices in London and Leeds, specialising in the residential, office, industrial and strategic land sectors but 32 redundancies were made following administration.
A newly-published administrator’s report shows the business was recently sold for £325,000 to two associated companies, leaving creditors owed more than £35m.
The majority of that debt – £30.8m - is owed to associated firms but more than £2m is owed to dozens of other creditors and £2.5m to HMRC.
The report states an estimated £105,000 is available to partially repay HMRC 4p in the pound but also adds there is “no likelihood” that unsecured creditors will receive any money back.
Rob Keyes, joint administrator, said the company had been funded by a majority shareholder called Dooba Finance UK and had been receiving “significant loans” from it following annual losses.
His report said: “The company began experiencing financial difficulties when Dooba withdrew its financial support given the extensive sum owed by the company. The financial problems were exacerbated by the company's inability to repay a recently accrued debt to HM Revenue & Customs.
"The company was unable to refinance the debt and all other restructuring options were unavailable given the significant size of the deficiency. CEG has two loans from Dooba and a further loan from Gerard Versteegh Holdings. Both lenders made formal demand of the sums owed to them.
"The HMRC debt was also increasing month on month and due to the issues detailed above the company was unable to meet the increasing liability. The company is technically insolvent as it is unable to pay its debts as and when they fall due coupled with the fact that its liabilities exceed its assets on a balance sheet basis. The company had no cash to enable continued trading and no further finance was available.”
The report states that company’s assets were acquired for £325,000 BY RPG1 Management Limited and Dooba Finance UK. The report said: “The purchasers are considered to be connected parties as the purchasers are connected by virtue of a group structure with common directors, shareholders and ultimate beneficial owner.”
Companies House records show RPG1 Management Limited was founded in July and is controlled by CEG founder and chairman Gerard Versteegh, with CEG chief executive Matthew Farrell also listed as a director.
The administrator’s report also revealed that prior to administration beginning, “it was also apparent that there were no funds available to pay staff salaries going forward and staff had not received salaries for several weeks. A large portion of staff had already left the business”.
Mr Keyes said: “The administrators consider that the sale to the purchasers will achieve the statutory purpose of the administration, was the most appropriate course of action and that the sale price achieved was the best reasonably obtainable in the circumstances. It has achieved a better result for the company's creditors as a whole than if the company had been placed into liquidation.”