Contingency planning crucial to collect out and sale of flooring distributor
Background
Despite a restructuring of the business following a management buy-out in 2022, a major UK distributor faced mounting financial pressure with declining sales and rising overheads triggering significant cash flow challenges. The company’s invoice finance provider, concerned about deteriorating business health, engaged our colleagues at FRP Advisory’s specialist Restructuring team to assess the situation and explore recovery options.
Recognising the complexity of the ledger and the urgency of the situation, FRP brought in Hilton-Baird Collection Services to support contingency planning and maximise recoveries for the lender.
The challenge
The business was heading toward administration with limited buyer interest confined to one division. The ledger was sizeable – over 2,500 debtors – and initial recovery estimates raised serious concerns about the likelihood of the full repayment.
Internally, the business was stretched. Documentation was inconsistent, systems were fragmented and there was limited capacity to manage collections post-administration. The risk of losing control over receivables and stock assets was high and the lender needed assurance that their exposure could be recovered, even in a worst-case scenario.
Hilton-Baird Collection Services worked closely with our colleagues at FRP to conduct a comprehensive contingency review. The team undertook a deep analysis of the ledger, systems and contractual obligations, identifying opportunities to secure documentation and strengthen the lender’s position ahead of administration.
The solution
By collaborating with retained finance staff and valuation experts, Hilton-Baird helped convert stock into receivables, enforce credit terms and vet customer creditworthiness. This proactive approach ensured that the ledger was stabilised and recoverability maximised.
Following administration, Hilton-Baird’s team was retained to lead the collect-out process. Their prior groundwork enabled a seamless transition, allowing them to drive recoveries across the ledger while supporting ongoing trading to preserve brand value and optimise stock realisations.
The result
Both before and after the administration event, with the benefit of the secured paperwork the team at Hilton-Baird Collection Services utilised all their experience to collect more than £20 million on the ledger across more than 2,500 debtors – an impressive 89% recovery rate. This far exceeded initial expectations and ensured the invoice finance provider was repaid in full.
The collaborative effort also enabled the successful sale of a business division, generating additional funds for creditors and demonstrating the value of early intervention.
