Potential Finance has been put
into administration after having become unable to settle
“cross-company guarantees” called in by its creditors.
Several bank-creditors of the
company’s subsidiary, Potential Vehicle Hire (PVH), which has 1,000
units, made it clear that they would seek to enforce these
guarantees. This left Potential Finance with no alternative but to
enter into administration on 17 March.
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KPMG’s David Standish and Allan Graham have
been appointed joint administrators and will manage the affairs,
business and property of the company.
The formerly AIM-listed company had struggled
for several months to try to avoid a formal insolvency process.
Potential has ceased trading ordinary shares
on AIM after Charles Stanley Securities, Potential’s nominated
adviser, resigned and no alternative could be found by a
pre-arranged date of 19 March.
Potential Finance’s other operating
subsidiary, Potential Asset Finance (PAF), was placed into
liquidation at the beginning of February as it was no longer seen
to be a “viable business”, according to a report by the London
Stock Exchange.
Liquidation proceedings into PAF began after
its five finance providers exercised their rights to take over the
hire purchase and lease agreements they had funded, leaving PAF
without its core portfolio of transactions.
Despite reporting good results in the first
half of 2008, Potential Finance was hit hard by the financial
turmoil in the second half of the year.
At the end of November, it requested that
trading in its shares be suspended after two failed efforts to sell
PAF and then PVH.
The attempted sale of PAF, which initially
seemed to have had a good chance of succeeding, eventually failed
because the proposed purchaser sought to “alter significantly” the
terms of the disposal immediately before completion.
With uncertainties over the disposal of PAF,
Potential Finance also tried to sell its vehicle hire business.
This second attempt also failed after the
potential purchaser withdrew following the sudden deterioration in
the motor finance market.
This led to the company’s request to suspend
trading in shares on 24 November.
Last month it emerged that reassurances from
Potential Finance that it would pursue the recovery of its one
remaining defaulting debtor was not enough for its creditors, and
ultimately led to the company entering into administration.
