1. A Lifeline for Business Turnaround Management Association Company Voluntary Arrangements Eric Walls Turnaround & Insolvency Practitioner Director KSA Group Ltd

2. A Lifeline for Business CVA’s and Turnaround KSA will present on the use of Company Voluntary Arrangements ("CVA") in turnaround situations and will focus on the practical issues of establishing the suitability of CVAs in particular situations, getting a proposal off the ground, the negotiation with stakeholders and creditors, legal and technical issues affecting the same. www.companyrescue.co.uk

3. A Lifeline for Business CVA’s and Turnaround Establishing CVA Initial enquiry filtered by trained advisors Looking for struggling but viable companies Currently insolvent or near insolvent Under pressure, management failing Need to restructure viable business Meet with board on site – Assess ALL options in detail – Report in writing as to recommended solutions www.companyrescue.co.uk

4. A Lifeline for Business Formal and Informal Options Available? Trade out (TTP) + refinance: credit crunch = not easy, tougher HMRC ahead? Trade sale – Enough time for due diligence, high gearing and creditor threats ? Administration / pre pack ? SIP 16 and business issues Liquidation – often the case that only option Administration followed by CVA ? CVA or company voluntary arrangement may be suitable www.companyrescue.co.uk

5. A Lifeline for Business CVA Candidates? The five key questions? Established marketplace / niche within that marketplace Potential to grow and prosper given finance and management needed Systems or management fundamentally in place or easily implemented Management needs determination to succeed Chemistry – need to work together with advisors www.companyrescue.co.uk

6. A Lifeline for Business KSA Group CVA process Deal making & structuring supplies with creditors Control creditors (creditor liaison) we call every creditor and explain process and timetable Restructure balance sheet (remove pressure) Enable structure for recovery, remove people /costs Framework to introduce financial products /liaise with the bank and debt providers Extensive detailed financial forecasting www.companyrescue.co.uk

7. A Lifeline for Business KSA CVA’s Company Voluntary Arrangement – High levels of due diligence – Compare all options and assess viability – Build detailed statement of affairs – Build very detailed financial models – “What if“ scenario planning – Set out strategies to board, bank and advisors – Agree final deal and then take to creditors Typically 4-5 weeks plus statutory notice period Say 7-9 weeks overall, or longer www.companyrescue.co.uk

8. A Lifeline for Business CVA’s, Banks and Pre-Packs CVA has huge flexibility and power – Can control winding up petitions with case law and aggressive counter legal action – Consensus always best though! Many advisors and bankers not aware of the CVA approach – KSA always talks to bank with a plan – CVA’s usually little impact on bank remedies and securities Most banks against pre-packs to incumbent directors / members – CVA more acceptable now? Will landlords start rejecting JJB style CVA’s? www.companyrescue.co.uk

9. A Lifeline for Business CVA Deal Structure? Generally we set say 40-60% of future net profits into scheme Typically five year phased deal with monthly contributions Bank capital payments frozen or continued – Detailed cashflow determines what is required Seek new ABL finance or investment if needed RPO picks up claims for redundancy / notice Exit property quickly www.companyrescue.co.uk

10. A Lifeline for Business CVA Deal Structure (cont.) Often seek introduction of non exec finance director – Improved financial and management reporting Determined various unwanted lease / HP deals – Re Doorbar and Park Air Services – Standstill agreement on wanted lease/ HP deals Exit property, factories, retail outlets www.companyrescue.co.uk

11. A Lifeline for Business CVA Benefits for bank? No asset meltdown & crystallisation of loss in administration No loss of securities or remedies Improved financial reporting obligatory in our CVA’s Supervisor to “police” CVA Reduction in bank management time CVA brings end to creditor pressure HMRC Petitions e.g. withdrawn www.companyrescue.co.uk

12. A Lifeline for Business Benefits for creditors? Trade creditors get dividend plus ongoing trading on cash terms Retain a future customer Supervisor oversees CVA contractual obligations Business must pay future taxes on time – Mitigates costs to state of benefits, redundancy costs – Default if not paid HMRC will closely examine future payments and returns Return generally better than terminal Consensus and involvement - not fait accompli like pre-pack www.companyrescue.co.uk

13. A Lifeline for Business Benefits for Board/ Members Still managing the business No PG call up, no loss of homes Remain in control with tighter management & reporting controls Steadily trade out of troubled waters Repay creditors who had faith in them www.companyrescue.co.uk

14. A Lifeline for Business CVA Benefits CVA is a powerful consensual solution – Not suitable for many cases Avoid asset meltdown Avoid intervention by FSA (financial) SRA (for lawyers) – KSA proposed first LLP CVA for a law firm in 2008 Avoid usual loss crystallisation for charge holders Restructure business aggressively, remove fixed, overhead and people costs Cost effective process v administration – Less risk for office holders too! www.companyrescue.co.uk

15. A Lifeline for Business Eric Walls & KSA Group Ltd Eric Walls KSA Group – Licensed IP – UK Director of Turnaround & Insolvency KSA – Involved in CVA led turnaround since 2001 KSA has a team of 20 with 2 insolvency practitioners Cover the country with 3 offices & a team of regional managers Learn more about CVA’s and KSA at – www.companyrescue.co.uk www.companyrescue.co.uk