Creditors of luxury kitchen brand see £2.8m disappear down plughole

Credit: Mereway Kitchens

Administrators of a luxury kitchen brand say the firm went down owing £2.8m to trade and unsecured creditors, who will not receive any of the cash owed to them.

Mereway Kitchens fell into administration on August 18 after the company suffered a loss, which resulted in the partial withdrawal of credit insurance.

Although this was partially reinstated following discussions, the impact caused concerns for management and discussions were held with the bank regarding its liquidity position.

As a result of pressure and a credible threat of a winding up petition being presented by an overdue creditor, directors formed the opinion that it was unable to pay liabilities and appointed BDO on June 30 to lead an accelerated merger and acquisition process.

BDO were then appointed as administrators on August 18 and secured a pre-pack deal later that day with Highlight Green Acres.

The firm’s administration report reveals that Mereway Kitchens’ unsecured creditors included Birmingham City Council (£428,000), the Canal & River Trust (£190,000) and Decorative (£196,000). BDO says there are insufficient funds to pay them what they are owed.

With no preferential creditor, HMRC falls as the secondary creditor and is expected to be paid £1.4m.

BDO administrators are also in conversation with the Royal Bank of Scotland Invoice Finance on how it can maximise recoveries from assets over a £2.5m sales ledger against a liability of £1.4m to the bank.

There is also a £1.13m Coronavirus Business Interruption Loan owed to NatWest.

Whilst turnover returned to pre-pandemic levels in 2022 at £20.3m, Mereway Kitchens made a loss of £1.3m and £578k in the period to April 30 2023, leading to its demise.