The administrators for the Arjowiggins UK companies that remain in administration have updated on their progress.
FRP Advisory’s joint administrators’ six-month progress reports for Arjowiggins Fine Papers (AWFP), which runs the group’s Stoneywood mill in Aberdeen, and Arjowiggins Chartham (AWC), which operates the Chartham mill in Canterbury, have now become publicly available at Companies House.
Reports have also been made available for Arjowiggins Sourcing, a company established to purchase pulp raw material across the group run by parent company Sequana, investment holding company AW UK Holdings, and UK sales agency Performance Papers, which had a registered office in Manchester but operated from offices on the same industrial estate in Basingstoke as the firm’s separate Creative Papers business.
All five reports are dated 13 August 2019 and cover the period from 14 January 2019 – the day before it was confirmed that the trading companies within Arjowiggins UK had been placed into administration – through to 13 July 2019.
The report for AWFP, which operates the 489-staff Stoneywood Mill in Aberdeenshire and a 29-staff distribution depot in Basingstoke, said that after taking control of the business “the joint administrators were made aware of the importance of maintaining a supply of pulp while the company continued to trade”.
Prior to administration, it purchased pulp on purchase and consignment basis from another group company. This arrangement could not continue following administration, so the administrators said they made arrangements directly with pulp providers to secure continuity of supply.
All business suppliers that are required for trading were also contacted by the administrators to ensure continued supply and also to agree revised payment terms. The report said that, in certain instances, the credit insurers of suppliers insisted on additional charge being levied.
The company was loss making prior to administration, with trade losses for the period from 14 January 2019 to 30 June 2019 of £1.6m, on sales of £51.9m according to the report.
“At the outset of the administration it was anticipated that a sale of the company would be achieved by April 2019 and would have restricted trading losses, however, the sale process has become protracted,” it said.
“It remains the joint administrators' opinion that the best outcome for the creditors of the company would be achieved by a sale of the business and assets on a going concern basis as opposed to a managed wind down of the business and sale of assets on a break-up basis.”
The report went on to outline the various stages of an attempted sale of AWFP and AWC. It confirmed that a teaser document outlining the opportunity was circulated to approximately 300 potential buyers, with a non-disclosure agreement signed by 46 parties, 13 of which placed indicative offers/expressions of interest for individual sites.
The administrators accepted a bid from one party on 26 March 2019 and engaged in a due diligence process, with a view to completing a sale of the business and assets by the end of April.
When it became clear shortly after that this party was unable to secure the necessary funding to complete a purchase, the administrators reverted back to previously interested parties to explore whether any were in a position to complete a going concern sale.
The report continued: “In May 2019 the group’s previous management advised the joint administrators of their interest in purchasing the mills based at Aberdeen (AWFP) and Chartham (AWC). As negotiations pertaining to a management buyout are ongoing, further details will be provided in the next report to creditors.”
It added that, by way of contingency planning, the administrators have also reverted back to parties who were interested in the property and moveable assets and that, should the MBO not complete for any reason, it is anticipated that the administrators would move towards a managed wind down of the mill and accelerate discussions with those parties.
The report said it is currently anticipated that there will not be sufficient funds available from AWFP to make a distribution to unsecured creditors, other than by way of a prescribed part, which is anticipated to total a maximum of £600,000.
The AWC report added that AWC “has traded at a broadly break-even position within administration (as opposed to a significant loss for the same period in the previous year outside of administration)” but that the level of orders received from late July has reduced significantly.
It said administrators are currently discussing with company management potential cost savings to bridge the position to a potential sale.
The report added that, on present information, it is anticipated that there will be sufficient funds available to make a distribution to AWC's unsecured creditors, but that “the exact timing and quantum of a potential dividend to creditors is unknown and will be subject to final realisations”.
A spokesperson for the administrators confirmed to PrintWeek yesterday (5 September) that the detail in the reports “remains the current situation”.
Scottish Enterprise, which provides grants and funding to businesses in Scotland, said in July that it agreed in principle to offer financial support for the MBO deal.
A Scottish Enterprise spokesperson has now told PrintWeek it has conditionally approved its offer of support.
“We remain committed to working with all parties to secure a future for the site and its employees.
“We’ve conditionally approved an offer of financial support and we’re supportive of a deal with the MBO team once a commercial agreement is reached between them, the administrator and lenders.”
Meanwhile, a separate administrators’ progress report dated 7 August 2019 has also been published for synthetic coated paper manufacturer Arjobex, which traded as Polyart, confirming the events leading up to the company’s July sale to France-based private equity firm Prudentia Capital.
By Richard Stuart-Turner, Friday 06 September 2019 PrintWeek.