A woollen yarn spinner and carpet industry manufacturer has been sold through a prepack deal following its entry into administration.
The company undertook a review in mid-2024, which identified the need for significant cost savings to remain viable. This led to a decision to outsource 50% of production to an overseas supplier and reduce its workforce. By October and November, redundancies were implemented under the new structure, with total restructuring costs estimated at £2m. To finance these changes, the company sold surplus assets and considered price increases, but these measures failed to generate sufficient funds.
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Financial difficulties persisted, with sales of £25.6m recorded for the eight months to August 2024, alongside a loss of £500,000. Comparatively, the prior year reported sales of £32.7m and a loss of £300,000. Attempts to secure additional debt financing were unsuccessful, leaving the company unable to fund its operations.
Management subsequently made an offer for the business and assets on a pre-pack basis. Upon the appointment of administrators, the business was sold to management under LY Manufacturing Limited on 27 December 2024 for £3.3m. The transaction included £1.5m for plant and machinery, £1.4m for goodwill, and £300,000 for stock.
Secured creditors, owed £9.9m, are expected to be fully repaid through realised assets totalling £10.5m. These funds derive from the business sale and trade debtor realisations. HMRC, a secondary preferential creditor, is owed £350,000, while 53 employees are collectively owed £28,000; both are expected to be repaid in full.
The prepack sale marks a significant restructuring milestone, aiming to preserve the business under new ownership despite substantial financial challenges.
Source: www.bigfurnituregroup.com