|The lights are turned out at Norbain - momentarily
The mysterious demise of UK distributor Norbain
On Monday 2 July Norbain issued a cryptic press release. Apparently, “the UK business and assets of Norbain” – the largest distributor in the UK – have been sold to Newbury Investments (UK) Limited by “the Administrators, KPMG”.
Norbain In Administration – this is news to the security industry!
Administrators are typically appointed when a major creditor pulls the rug on a struggling company because lending agreements have been breached. Calling in Administrators is the last resort used to recoup as much of their debt they can, typically at a significant discount to what was originally lent.
Once Administrators are appointed, the company usually continues trading “In Administration” while the Administrators look to sell (“realise”) as many assets as possible to pay off as many debts as possible. Finding a trade buyer for the business usually produces the most cash.
This cash is then allocated to creditors in order of priority:
fixed charges - like a mortgage secured against a property
Speculation that Newbury paid £20 to £40 million for Norbain - a significant discount to its £100m valuation some years ago
- expenses of the Administrator
- preferential creditors which include the tax man
- floating charges - like an overdraft facility
- unsecured creditors - who rank equally between themselves
It is rare for unsecured creditors to receive any significant proportion of their debts as the cash has been used up paying off “higher priority” liabilities.
Norbain (or their new owners) have yet to clarify the situation but apparently KPMG were appointed on Friday 29 June, and they promptly sold the UK business and assets of Norbain – i.e. leaving all the debts and liabilities with the “old” company. Industry insiders have been speculating that Newbury paid between £20 and £40 million for Norbain – a significant discount to the £100 million plus valuation when Norbain was refinanced some years ago.
This legal but contentious practice enables a business to continue trading as before while shaking off debts owed to other companies
No doubt Norbain (or its principal lender/s) have been exploring these options for some weeks, before triggering Administration on Friday. This legal but highly contentious insolvency practice is known as a “pre-pack”. It was recently made infamous by failing celebrity chefs’ businesses including Antony Worrall Thompson’s. It is contentious because it enables a business to continue trading as before while shaking off debts owed to other companies.
Over the coming weeks we will be exploring the demise of Norbain in detail – what happened, who did what and why, who is going to get hurt and who is to blame.
Watch this space.