Preferential creditors owed £14.5m after Cambridge Broadband crash
Joint administrators at BDO are confident of rescuing some money for the two main creditors hit hardest by the collapse of Cambridge Broadband Networks Ltd. But the payout is likely to be a drop in the ocean compared to the £14.5 million the duo are owed.
Five years of falling sales sent CBNL into a tailspin in 2019, its 20th anniversary year, and BDO was unable to find a buyer after being appointed to attempt a rescue.
The two main preferential creditors – TriplePoint Venture Growth BDC Corp and BMS Finance (UK) Ltd were owed £7.288m and £7.23m, respectively, when CBNL entered administration.
In a report to all creditors, joint administrators Antony Nygate and Colin Haig – appointed on February 6 – expected that there would be sufficient funds to enable a distribution to both the secured and preferential creditors but they could not say how much or when. They say the company will be dissolved once the administration process is complete.
Global broadband technology specialist CBNL was incorporated in November 1999 and established by 10 Cambridge University engineers who secured private equity funding to develop innovative mobile communications. It based the venture at Cambridge Business Park and had African subsidiaries.
BDO’s report says that CBNL experienced a decline in sales revenue over the past five years. Due to the need to invest in infrastructure and the level of overheads combined with a decline in revenue the company was loss making. Revenue decreased from $37.2m in 2017 to $23.7m in 2018 with an operating loss of $8m.
During 2019 cash flow pressure continued to mount owing to a trend of continued declining sales in the period. Sales revenue declined to $14m during the nine-month period to September 30 and the business incurred a loss of $7.7m.
In December 2019 management implemented certain measures to restructure operations including a reduction in office space, with the landlord agreeing to reduce rental costs going forward.
In January 2020 revised cashflow forecasts indicated that significant funding would be required in the short term to keep the business afloat. During this period cashflow pressure intensified as key suppliers refused to release stock without payment.
The shareholders were unable to provide additional investment so the directors sought independent legal advice as to the options available.
BDO had originally been introduced to the company on October 31, 2019 and on November 7 was engaged to conduct an accelerated mergers and acquisitions process and to review the short term cashflow forecast.
A campaign was launched in early November offering the company and/or the business and assets for sale but no offers capable of completing were received for the shares of the company or the business and assets, says BDO.
BDO was further engaged by CBNL on January 22 to undertake contingency planning work and another review of short term cashflow forecast. Due to intensified creditor pressure, a deteriorating cash position and no offers received for the business the directors decided to file a notice of intention to Appointment. On Jan 30 an application for the appointment of joint administrators was made by the directors.
The joint administrators say it has not been possible to sell CBNL as a going concern “due to the high levels of secured and unsecured debt and lack of funding to allow the company to trade in the longer term.”
The next objective – achieving a better result for creditors as a whole than would be likely if the business was wound up without first being in administration – is said to be “not achievable as we do not anticipate that there will be distribution to unsecured creditors other than via the prescribed part.”
That left the final option which is being pursued – realising property to make a distribution to one or more secured or preferential creditors.
Staff were made redundant immediately after BDO was appointed for the administration process – save six employees retained to help with the wind down of operations and realise the company’s assets.
Cambridge Broadband Networks Group Ltd offered to acquire certain assets and on March 19 a deal was agreed for an initial consideration of £195k – including £60k for Intellectual Property and business rights, and 12k for certain plant, machinery and office equipment.
BDO hopes to sell remaining customer contracts and the share capital of the company’s subsidiary CBNL Nigeria and an offer has been accepted subject to contract. The identity of the buyer and amount agreed is not being disclosed until the sale is completed.
Other book debts of $459,432 and €7,470 will be collected by the administrators with the help of a former employee. The recovery of the residual book debts is at this stage uncertain.
BDO is in the process of realising £1.265m from the company’s main bank account and around $2k from Silicon Valley Bank accounts.
The value of the company’s net property after allowing for payment of preferential claims will be $3.948m, the administrators say.
CBNL’s website remained operational at the time of writing with no mention of the administration process as far as Business Weekly could determine.