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Carillion: Aspin Group took £800k hit prior to administration

Ground engineering firm Aspin was owed around £800,000 by Carillion before its holding company was placed into administration, an administrator’s statement of proposals has revealed.

Ground engineering firm Aspin Group Holdings entered administration in February as part of pre-pack deal which saw its subsidiaries sold to US private equity firm Sandton Capital partners.

According to a statement of proposals by administrator Deloitte, Aspin Group and its subsidiaries were owed around £800,000 by Carillion when the UK’s second-biggest contractor went into liquidation in January.

This included an exposure of £500,000 for completed work and £300,000 exposure for ongoing work.

The Carillion debt placed further strain on the cashflow of Aspin, which had appointed Deloitte in December to facilitate a sale of the business.

Deloitte was brought in to sell Aspin after the firm was hit with a series of cashflow difficulties caused by restructuring costs and the unwinding of loss-making contracts.

The firm identified an additional funding requirement of around £3m, Deloitte’s report said.

Despite the group’s cash position being further damaged by the Carillion collapse, Deloitte was able to bring in Sandton Capital Partners as a buyer.

The US private equity group bought the company’s trading subsidiaries: Aspin Group Ltd, Aspin Construction Group Ltd, Aspin Consulting, McGrattan Piling and Supplies, Rogers Structural Investigation.

Unable to meet its debts, Aspin’s directors resolved that the company was insolvent and a share sale through administration was considered the most appropriate option.

The company changed its name from Aspin Group Holdings Limited to Castlegate Nexus Limited on 19 February in a bid to mitigate any impact on its trading subsidiaries.

The shares were officially transferred to Sandton on 21 February and Aspin, under the name Castlegate Nexus, was put into administration on the same day.

Aspin CEO Russell Ward said the administration did not affect any of Aspin’s trading companies, meaning no trade creditors lost money.

What is a pre-pack administration?

A pre-pack administration refers to a system where a company agrees to sell some or all of its assets before going into administration.

If a company is facing cashflow issues or insolvency, an insolvency practitioner might decide a pre-pack deal is the best route forward and search for potential buyers.

Once a buyer/buyers are found, the company can sell off all or part of the company’s assets before being placed into administration.

A pre-pack deal can be beneficial for the company as it can allow part of the company to continue to operate without a break in trading. A break in trading could be detrimental for the value of the business and result in job losses.

The process is controversial, with creditors often losing out and buyers sometimes being directly connected to the company in administration.

The administration of Aspin Group Holdings came after years of consistent financial underperformance by the group.

The administrator’s report found that errors in project management and pricing saw Aspin hit by a number of loss-making contracts, resulting in group losses during 2017. 

The documents describe how in February 2017 Mr Ward was brought in as chief executive and a restructure of the group took place, with several management staff being made redundant.

However, the restructure was unable to halt cashflow pressures on loss-making contracts, while restructuring costs and delays to projects added further to costs.

The administrator’s report revealed several of Aspin’s former directors who were made redundant under the restructure had brought wrongful dismissal claims against Aspin. Deloitte said the cases were still outstanding.

An Aspin spokeswoman said the company made a handful of redundancies with full consultations and compliance, but that no-one involved was claiming wrongful dismissal. 

Mr Ward said: “The company had been underperforming financially for some time under the previous ownership of the founding partners who had ventured outside their successful core business.

“This is precisely why I was brought in a year ago to lead the turnaround programme.

“Part of the process has involved the review of the company structure and placing the old investment vehicle which had been the group holding company, Nexus Castlegate, into administration and its history is recorded.

“This did not affect any trading company so no trade creditors lost out. The trading businesses of Aspin were successfully and fully sold, with 100 per cent of the shares bought by the new owners.

“Last month we announced the next major steps forward with a more focused, senior-level executive team and new investment and ownership, transforming the company’s fortunes into a debt-free company, with a strong and solvent cashflow and balance sheet.

“The move has been welcomed by our people, clients and suppliers alike and now we’re on track for growth to achieve our ambition to become a £60m business by 2020.”

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