PUBLISHED: 12:43 01 April 2009 | UPDATED: 15:07 28 November 2012
February 09 News
In what is becoming an increasingly popular move in these hard times, gunmakers Webley Ltd have rescued themselves from failure by using what is known in the trade as a ‘pre-pack’ insolvency deal.
Webley, one of Britain’s oldest gunmakers, went bust on 31 December, only to be immediately bought back by its management, trading as a newly-formed company called Webley (International) Ltd.
As a new company, Webley (International) no longer has the burden of the ‘old’ Webley debts, although it will be honouring its warranties. But anyone who owed the ‘old’ Webley money, now owes it to the new one.
Confused? According to Simon Waller, a restructuring partner at legal firm Eversheds, it is completely legal and is known as a pre-packaged insolvency deal – used recently by tea and coffee chain Whittard of Chelsea when it went bust. “They are commonly used in markets that are quite limited,” explains Waller. “The administrator will do some discreet marketing but often the most likely buyers are those that know the business well and can move quickly to minimise the damage.”
As long as the administrator has got the best value price for the company, this is all completely above board, says Waller. However, one disgruntled creditor, who had lost money as a result, said he thought the rescue move was “disgusting”. Not surprisingly, these deals have been attracting public concern lately, and the Government is said to be cracking down on them in the coming months.
Tighter rules came in on 1 January 2009, which, amongst other things, will ensure that administrators handling these pre-pack deals are acting in the interests of the creditors as a whole. They will also be clamping down on “any directors who misuse the administration process to disadvantage creditors or seek to gain benefit for themselves”.