Administrators report £90m debt and SRA probe at Cobbetts
Law firm ran up liabilities of more than £90m before its collapse a report by KPMG administrators reveals
COBBETTS RAN UP total liabilities of more than £90m before its collapse, including £74.4m in outstanding lease agreements, a new report by the firm’s administrators has revealed.
The collapsed firm had four relatively new office premises in London, Birmingham, Leeds and Manchester, with the latter subjected to a costly 20-year lease agreement, Accountancy Age’s sister publication Legal Week reports.
Mark Firmin, Brian Green and Howard Smith, partners at KPMG, were appointed joint-administrators to the collapsed firm in February this year. They sold the business as a pre-packaged administration to former rival DWF.
The landlords, as unsecured creditors, are likely to receive just 2p for every pound owed for their £74.4m of liabilites.
The administrators’ report also revealed that the Solicitors Regulation Authority is currently deciding whether to launch an investigation into events at Cobbetts and the conduct of its members in the run up to its collapse.
A spokesperson for the SRA said: “We are looking to see if there are any issues we need to investigate.”
Details regarding any insurance refund are still unclear; however, a third party has made a claim to the monies, over which the administrators are currently taking legal advice.
In addition, the administrators are seeking to claw back some cash from the early termination of Cobbetts’ professional indemnity insurance policy, after the transfer to DWF shifted responsibility to the acquiring firm’s insurers.
The administrators racked up time costs of £267,840 for 774 hours’ work at an average rate of £346 per hour, while Pinsent Masons is set to be paid £169,367 in legal fees.
Secured creditor Lloyds Bank is set to recoup approximately £2.5m of the £7.3m it is owed, although a final figure has yet to be agreed, while unsecured creditor HM Revenue & Customs is owed £2.7m.
Cobbetts entered administration after being hit hard in the wake of the credit crunch. Its pre-pack takeover by DWF saw the firm pay a guaranteed £3.9m for Cobbetts’ assets and work in progress.
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The move saved about 430 jobs, although DWF announced 38 job losses following a redundancy round involving support staff last week.
A pre-pack is where the sale of a business is arranged prior to it entering administration and is sold immediately after entering into the process when administrators are appointed.