'Pre-packs save jobs', says expert
Controversial pre-pack administrations are the only way to save hundreds of jobs in Lancashire's struggling companies, according to an insolvency expert.
Matt Dunham, the North West chairman of industry body R3, said its members had reported that six out of ten jobs had been saved at firms which have been subject to a pre-pack deal, achieving a quick sale and stopping the companies from going into liquidation.
A pre-pack allows a company to be sold through a deal arranged before an administrator is appointed without the approval of its creditors, thus preventing it being 'attacked' by people it owes money too and saving it having to pay costly court fees.
The study by R3 analysed 89 pre-pack deals carried out this year, including six from the North West, which showed 88% of the 5,478 jobs at risk by the administration were saved.
Mr Dunham said: "With a dearth of buyers and incredibly tight financing around, a pre-pack is often the only option left in a large number of cases.
"In the current climate, you only need a whiff of trouble to reach customers or suppliers to find the whole business disappearing overnight."
He added that in half of the cases looked at a pre-pack was the only alternative, in six-out-of-ten cases it was the best way to save the workforce and in more than two-thirds of cases the sale had to be done quickly to prevent industry 'gossip' destroying what remains of the business.
Mr Dunham said a regular response from fellow insolvency practitioners was that pre-packs were unpopular with many but were seen as "a necessary tool" in the industry.
He said: "There has never been a recession like the current one and the difference now is the lack of financing because we have not seen the bottom of the market yet.
"Pre-packs play an important part in the rescue culture and have a track record for saving jobs and generating a better return to creditors."
Have you experienced a pre-pack administration? Tell us your views by emailing david.coates@lep.co.uk or commenting below.
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