Tuesday, November 24, 2015

News: Interest in Kiveton Park Steel

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Discussions are ongoing with potential buyers of the historic Rotherham firm Kiveton Park Steel, that went into administration earlier this year.

Established in 1922, the family company originally produced items used within the UK mining industry and also supplied specialised products into the defence and aircraft industries.

Phil Pierce and Ben Woolrych, partners of FRP Advisory, were appointed as administrators after the business has recently faced unsustainable pressure on its cash-flow due to a sharp deterioration within the specialist steel market. Turnover for the year ending June 2011 was up by 50% to £27m, by June 2014 this was back down to £19.4m. For the year to June 30 2015, turnover had fallen to £16.2m and the business reported a loss of £1.3m.

The administrators secured extended supply agreements to allow the business to continue to trade as it was marketed for sale. The supply agreements helped secure jobs during this period for around 110 staff, representing the vast majority of the 120 staff associated with the business at the point of administration.

A report from the administrators shows that 13 expressions of interest have been shown in the award-winning business and assets, with eight still "live." Many more parties have been interested in the assets of the business on a break up basis but this has not been pursued.

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The report said: "A number of site visits have been conducted and these continue to be arranged for interested parties. Discussions are ongoing with a number of interested parties and information is being provided for them to consider the options further."

The report highlights the events leading up to the appointment of administrators where losses could not be covered by enough new business or cash reserves, exacerbated by a £400,000 debt when a major customer went into administration in 2014.

Large deficits in the pension scheme and a failing IT system added to the financial woes. In 2015, in harsh trading conditions, one of KP Steel's main suppliers shortened its credit terms from 60 to 45 days, impacting on cash flow.

A review of the business with the aim of significant restructuring was carried out with FRP Advisory's help in searching for new debt funders and equity providers.

In August 2015 and based on the company's financial results, a credit insurer stated its intention to withdraw cover from a number of suppliers, most notably Tata Steel - the company's main steel supplier. This "huge blow" would have left Kiveton Park Steel paying for raw materials on a pro forma basis, crippling cash flow.

With administrators called in, it is estimated that creditors are owed some £18m - a large proportion (£15m) being the pension scheme.

A meeting of creditors is due to take place on December 2.

Kiveton Park Steel website

Images: Kiveton Park Steel

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