Bone Steel was put into receivership this week after administrators KPMG rejected a proposal to carry on trading.
Construction News understands that the management team had wanted to continue trading through the administration process but the request was rejected, with all but five employees made redundant last Thursday.
Blair Nimmo and Gary Fraser of KPMG were appointed joint receivers after the company was hit by steel prices going up and payment terms from main contractors lengthening.
It is understood that the company’s legacy debt proved too much for Bone, with recent contract wins, a healthy order book and restructuring plans not enough to convince creditors that it had a viable plan for carrying on.
Bone’s most recent accounts showed debts of almost £3 million, with a new bank loan of £1.6m taken on, and almost £400,000 of cash going out as a result of its operating activities.
It was unclear whether the firm’s bank, state-owned RBS, was responsible for all of Bone’s debt. The business was family-owned and had a history dating back more than 70 years.
Bone had been working in the education market on some Building Schools for the Future projects and academies, as well as in prisons. A well-placed source said its biggest clients were Carillion and Miller Group.
“We had a healthy order book, we had plans in place for a restructuring, but the business had a legacy debt from previous management teams,” the source said.
Former chief executive Chris Bone said in a statement: “Demand for structural steel declined by more than 50 per cent in the last 18 months, while challenging conditions in the construction market continued to depress margins and induce project delays out of the company’s control.
“Despite a healthy order intake earlier in the year, contract slippages, volume reductions and supplier credit restrictions combined to make trading extremely difficult.”
After 113 people were made redundant last Thursday, the only people left were quantity surveyors dealing with the order book, an accountant responsible for payroll, someone to answer the phones and another to look after
KPMG, meanwhile, was left looking to find steel firms to take on the contracts, with some speculation suggesting Severfield-Reeve was likely to take advantage.
The accountancy firm was called in after a board meeting on Wednesday concluded that a restructuring plan would not succeed.
CN understands that the plan had been considered for some time.