Insolvency procedures surrounding
fallen Global EPP highlight need for asset registry systems
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If the consequences of not having a system of
asset registry needed highlighting, wary plant lessors need only
look at the insolvency procedures surrounding fallen plastics
manufacturer Global EPP for a story that will keep them awake at
night.
The exact details of what happened at Global
while it was trading will remain murky until police investigations
are complete, but it is understood that careful removal and
replacement of serial numbers on extrusion line machinery allowed
the company to finance 71 pieces of plant 579 times through 29
lessors, to the tune of more than £60 million (€70 million).
By furnishing financed machines with serial
numbers corresponding to those recorded on the lease agreements of
any funders undertaking inspections, Global was able to present the
same assets as belonging to whichever lessor sent representatives
on site.
The aftermath of this illusion caused
extensive legal manoeuvring when an administration team from
PriceWaterhouseCoopers, led by Colin Haig, moved in to break up and
sell off the collapsed firm’s asset base in November 2007.
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By GlobalDataBecause of the multiple title claims on almost
all of Global’s machinery, there was no basis for individual
lessors to mitigate their losses through repossessions, so leasing
creditors took on more of a collective mentality to try to recoup
their losses.
Nevertheless, attempts to date have not been
fruitful. As a result of the negation of title claims on the back
of the multiple financings, lessors have been bumped into the pool
of unsecured creditors, where they now await a final distribution
of funds realised from the company’s liquidation.
Global’s only secured creditor – Venture
Finance Plc, which lent the company
£5.5 million on an invoice finance facility – has already recovered
£1.4 million from factored debts and looks set to receive the £1.9
million currently accrued through the sale of the company’s assets
(excluding those few items on which lessors had undisputed
title).
While one legal source commented that a “best
case scenario” for lessors would be a 2p-4p to the pound return on
their losses, a spokesperson for PwC suggested that not only would
a final distribution for unsecured creditors be unlikely, but even
Venture’s lending was “unlikely to be discharged in full”.
For lenders such as Bank of Ireland and
Landsbanki Commercial Finance – which provided £6.7 million and
£6.4 million to Global respectively – prospects look bleak
indeed.
The administration is expected to continue
until November, although PwC doubts further significant recoveries
are likely to come from the wreck of the plastics maker.
In the meantime, as one lawyer commented, most
of the funders involved in Global have given up the hope of a
result and many have abandoned legal action entirely.
Meanwhile, Leicestershire Police are still
investigating the alleged fraud, with four suspects, believed to
include directors of Global EPP, currently on bail.
The suspects are three men aged 41, 57 and 67,
and a woman aged 51 – two were arrested on 14 March last year and
two since.
It is believed PwC may also be pursuing civil
recovery claims against at least one of these individuals, although
it declined to comment on the matter.
