Davenham syndicate faces £47m loss
THE banking syndicate which financed Manchester-based asset lender Davenham Group is facing a loss of almost £47m.
A newly-filed statement of affairs from the group’s former directors indicates that at the time the business fell into administration in October last year states that although the company owed £69m to a syndicate of banks led by Royal Bank of Scotland, it was only likely to recoup around £22.2m through the collection of remaining debts.
Thiss means the syndicate was facing a shortfall of £46.8m on the money it is owed. However, joint administrator David Whitehouse of Duff & Phelps has indicated that the final position may not be as bad as directors had anticipated, and that a further £2m could be recouped from existing assets. Of the £11.4m already collected, some £406,600 was surplus to forecasts.
In the six months to May 10, some six staff have been laid off and another has retired, but Duff & Phelps is continuing to employ a team of seven staff to collect the remainder of the company’s assets and Mr Whitehouse said that “most” of the property assets over which the business holds security are likely to be sold off by October.
“It’s going ahead of plan as far as the banks concerned and the current position is a bit better than they thought it was going to be.”
Davenham Group was founded in 1991 and had been through a number of buy-outs prior to its flotation on the stock market in 2005. The firm had initially grown by providing trade finance and asset-based lending to SMEs.
A move into providing bridging finance on property loans fuelled a period of rapid growth, assisted by a £300m financing deal with RBS in 2006. In the year to June 30, 2007 it had an asset base of over £277m and over 160 staff.
However, as property valuations plummeted the firm was stuck with a portfolio of underperforming loans and despite agreeing a £215m refinancing in 2009 it continued to struggle with debts.
Early last year, rebel shareholders who had been told in June 2010 that their shares were probably worthless launched bids to have the group’s managing director Paul Burke and chairman James Kerr-Muir replaced.
Several of them backed a proposal by former Hitachi Capital CEO David Anthony to reopen more profitable lending businesses to SMEs, but their plan was voted down in March and the firm eventually announced plans to place the company into administration on October 4, 2011.
Administrators have said that preferential claims from staff have been paid in full, but the shortfall to the banking syndicate means that trade creditors owed more than £200,000 are unlikely to be paid, nor is an outstanding VAT bill worth more than £1m.
