Bank debt hobbled law firm Marsden Rawsthorn
LANCASHIRE law firm Marsden Rawsthorn went into administration after failing to meet repayments on a £4m loan from the Royal Bank of Scotland.
According to a creditors’ report from administrators at KPMG, who were appointed in February, an attempt to sell the business failed so the firm’s 10 partners paid £1.24m to buy it through a pre-pack insolvency.
This avoided the prospect of the most successful parts being sold off and those partners in unwanted divisions facing bankruptcy.
The deal also allowed the firm to sidestep an intervention by the Solicitors Regulation Authority (SRA), which KPMG said would have carried a significant cost and left less for creditors. Although no statement of affairs has been prepared the report said RBS is owed £4.3m and unsecured creditors are owed nearly £500,000. They are expected to receive a dividend.
The firm has offices in Preston and Chorley and employs 80 staff. KPMG said the sale price reflected 70% of the value of the debtor book and work in progress. It said this was a better deal than the 40-45% achieved in other cases.
So far £20,000 has been paid with the remainder deferred. £600,000 will be paid in 13 monthly instalments until May 2014 and a further £350,000 in 12 instalments from June 2014. A lump sum of £200,000 must be paid within three years of the deal and a further £75,000 within 42 months.
The firm specialised in family law, personal injury, wills, probate and residential conveyancing. Latest filed accounts for the year to the end of April 2011 showed revenue was static at £4.2m but profit before members’ remuneration was up to £1m from £765,534. Net debt stood at £4.7m.
In a statement the firm’s chief executive Debbie Pettitt said: “We had been in dialogue with RBS since last year regarding a solvent restructure of the LLP, and it was hoped that we would come to a mutually acceptable agreement.
“However, at the last minute, RBS closed negotiations and left us with no choice but to undergo an insolvent restructure of the business. By entering administration, we safeguarded jobs and protected both clients and creditors.”
The new company now trades as Marsden Rawsthorn Solicitors Ltd.
