Silentnight in CVA plan
MATTRESS maker Silentnight has applied for a Company Voluntary Arrangement (CVA) in a bid to reduce its debt burden.
The family-owned company, which has been trading since 1946, said that it was seeking a CVA in a bid to reduce the liabilities it owes following a take-private deal completed in 2003 and to address its widening pensions deficit.
Silentnight’s headquarters at Barnoldswick, on the Lancashire-Yorkshire border, employs 650 people while a further 250 work at its facility in Batley.
The firm’s chief executive, Neal Mernock, said that although the company is trading profitably and is generating cash, it has an “unserviceable level of historic debt” and a growing pension liability which has steadily built up following a series of acquisitions made during the 1980s and 1990s when employees were all brought into the business on defined benefit (or final salary) pension schemes.
The last set of accounts for the company for the year to January 31 show that although Silentnight generated turnover of £107.1m and an operating profit of £1.5m, its net liabilities widened to £10.5m (2009: £5.7m).
The company is currently understood to be making payments to around 1,500 retired employees but only has around 100 members currently paying into the same defined benefit schemes.
Silentnight’s bank, Clydesdale, also withdrew its facility from Silentnight Holdings earlier this year.
“Unfortunately, the withdrawal of our facilities by our formerly supportive lender earlier this year has left us with an unserviceable level of historic debt,” said Mernock.
“That, combined with an onerous and growing pension deficit has forced us to seek an immediate injection of cash.”
Mr Mernock said that the management had tried several other options prior to seeking the CVA. Silentnight been put up for sale and management had sought funding from other banks.
It had also entered into negotiations with pension trustees and the regulator offering equity stakes in the business in return for a cap on liabilities, but this was declined.
Mr Mernock said this left the CVA process as “the only viable route forward at this time”.
The company has now convened a creditors’ meeting for May 6 in a bid to gain approval for the CVA process and will need the approval of 75% of its creditors by value in order to gain approval for a restructuring.
In practice, this involves gaining approval from its pension fund trustees as its major creditor. If approval were not granted, the company would face the prospect of administration.
“The approval of the CVA proposal by our creditors will be a major step forward in securing Silentnight’s future,” he said.
“With the ongoing support of our loyal suppliers and staff, and on a more stable financial footing, we are confident that Silentnight will continue to generate substantial profits, to outperform the wider market, and to innovate and grow market share as home to both the UK’s and the world’s biggest bed brands.”
Silentnight was listed on the stock exchange until 2003, when a deal was concluded to bring the business back into family hands. Some 75% of the company is owned by a family trust, Famco Holdings, with the remaining 25% being held by individually by John Clarke – son of the company’s founder, Tom Clarke.
