Wednesday, November 10, 2021

News: Rotherham broadband firm crashed with £38m in debts

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Investors in a failed Rotherham-based broadband firm were hoping to make a return with a five-year expansion strategy, instead it called in administrators after Origin Broadband burnt through half a million pounds a month.

Rothbiz reported last month that Origin Broadband had become part of TalkTalk following a sale out of administration.

Launching in 2011, Origin developed its own infrastructure and hosted the sixth largest broadband network in the UK. Supplying phone and internet services to businesses and homes across the UK (with around 80,000 customers), it switched between premises in Rotherham town centre and in Manvers.

Gareth Harris and Jamie Miller of RSM Restructuring Advisory were appointed as joint administrators on September 24 2021.

The administrators have recently published an update on their proposals which details how the company struggled with issues with "customer churn, low average revenue per user and bad debts leading to a contraction in customer base."

London-based Faro Capital, a private equity investment company, acquired Origin in 2018 and invested around £25m to date since its original investment, which inlcuded around £4m of legacy liabilities through placing the company through a Company Voluntary Arrangement (CVA).

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Faro's investment was to used to boost the customer base from 20,000 to 80,000 and fund ongoing losses.

The administrator's report states that management had identified that the company should be at a break even point with a customer base of 85,000 but administrators highlighted that this was unrealistic when putting together information to go out to potential investors.

The report adds that Faro was hoping for investment via debt funds and were optomistic of the five-year expansion strategy based on growing the customer base at material cost to generate a significant return. However administrators said that "they were becoming increasingly concerned about the company's finacial performance (in particular the level of cash consumption)."

Indeed, during the period May to July 2021, the company consumed cash of £500,000 per month from a customer base of 80,000, indicating that the company was much further away from the break even point. Administrators said that this was due to "dissapointing customer retention" which led to spending on replacement customers. Faro then concluded that it could not continue funding the current business and a sale was pursued.

22 bidders looked at buying Origin and eventually three parties competed to secure the assets. A deal was struck for Origin's customers, and around 100 staff, to move over to TalkTalk, the UK's leading value for money consumer and B2B telecoms provider, which is based in Salford.

Faro was the company's secured creditor and were owed some £27m. The sale was agreed for £17.8m and meant that Faro can expect £17.6m as a result.

Vodafone was Origin's biggest unsecured creditor and has been left out of pocket for around £8m.

Images: Origin

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Unknown November 22, 2021 at 5:12 PM  
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