Mail nails Lenark

This is a Saturday night preview of the article that appears in tomorrows Mail on Sunday

By Lisa Buckingham

Sturmey Archer, one of the most famous names in British cycle making, is
just seven days from crashing into liquidation with the loss of more than
300 jobs.

The dramatic end comes just two months after the 98-year old company was
bought for only £30 from its American parent by a Sussex-based company
called Lenark in what was hailed as a rescue bid.

But an investigation by Financial Mail shows that Sturmey Archer is just
one of a string of corporate failures associated with the directors of
Lenark, a group that specialises in buying distressed companies.

As Sturmey Archer - known for bicycle gears and brakes as well as Brook's
saddles - scrambles to salvage parts of the business, Financial Mail can
reveal that two other firms owned by Lenark, including stationery firm
In-a-Flap Limited, have just gone into liquidation. Another four are said
by insolvency practioners to be within days of the same fate.

Yet Lenark passed as a well-endowed investment firm running four divisions
containing some 17 companies.

Derby Cycle Corporation, the US group that owns the Raleigh brand, was
apparently convinced of Lenark's credentials and had no qualms selling
Sturmey Archer in the summer. That was despite the fact that Derby Cycle
chief executive Gary Matthews knew £4 million would soon have to be spent
to move Sturmey into a new factory as he had sold the freehold of its
Triumph Road plant to Nottingham University.

Other firms that were already on their knees were desperate to believe the
stories of successful business rescues which the executives of Lenark had
to tell.

'They seemed to me to be people who were going to rescue my business,' said
Rowland Blake, whose 25-year old family paper firm was bought by Lenark but
has now shut. 'The impression was that they had plenty of capital to invest
and my company would be part of the set up.'

Blake says he was paid only a quarter of what he had expected from Lenark
and has now moved from Surrey to Devon with his wife and two teenage
children to make ends meet.

Derby Cycle's Matthews, a former senior executive with Guinness, told
Financial Mail he was 'surprised' that Sturmey Archer was now facing ruin.

'We understood them (Lenark) to be a robust investment firm and they were
represented by top-flight counsel.'

And Matthews claimed that Derby had carried out the 'appropriate due
diligence'.

Yet some simple checks on Lenark and its directors and employees could have
sounded an alarm. The Department of Trade and Industry has revealed that
Simon Allso, one of Lenark's chief movers, was declared bankrupt in 1992
and has been linked with a string of insolvencies. The DTI provided a list
of eight firms, but insolvency experts say the true figure is much higher.

Allso negotiated the purchase of Sturmey Archer along with director and
major shareholder Barry Robinson, who lives in Las Vegas and lists his
occupation as professional gambler. Clive Walton, who resigned as a
director as the Sturmey Archer crisis erupted, was also on the negotiating
team.

The Experian credit rating firm described Lenark's financial position as
'weak' with current assets of just £48,000 at the end of the year to May
1999 and liabilities of £600,000. A credit alert is attached to Experian's
report on the company.

One of Lenark's major shareholders, Quniborne, also has two notices of
intention to dissolve, it was late filing accounts for the year to March
1999 and has two County Court judgments totalling £8,000 against it.
One banker who has loaned money to a Lenark company said he discovered that
Lenark had transferred assets and stock from one firm to a company set up
as a 'phoenix' or successor company. When the winding up of the first firm
was started, money was then transferred, too.

A person familiar with Sturmey Archer's finances said it was unlikely that
the company would find a buyer willing to take on liabilities for new
factories and redundancies totalling nearly £5 million when the company's
turnover is less than £15 million, its assets only £2 million to £3 million
and which incurred losses last year.

Yet despite the parlous state of Sturmey's finances and the need to vacate
its production plant in time for a year-end deadline, Lenark still charged
the company a 'management fee' of £62,000 a month.

The financial crisis came to a head when Sturmey's managing director, Colin
Bateman, approached his new bosses asking them to pay a cheque for £75,000.
A do-or-die board meeting was held last Monday to decide the future of the
Nottingham company, which is just two years away from its centenary.

Only one of the Lenark board, Clive Walton, turned up. His attendance was
brief. While the others round the table thought he had popped outside for a
cigarette, Walton apparently slipped down the fire escape and has not been
seen by Sturmey or its advisers since. He has now resigned.

Duncan Swift of insolvency practioners Grant Thornton is representing
Lenark and has been struggling to avoid liquidation and try to continue
trading Sturmey Archer to sell it as a going concern. But the gulf between
the company and Lenark had become so wide and bitter that Bateman and his
colleagues decided to move for liquidation.

That will almost certainly mean employees get only the £5,000 state
redundancy, even though many have spent a lifetime at Sturmey, whose future
appears doomed.

Little wonder there is so much recrimination. One manager said: 'We've been
sold down the river,' while a colleague added: 'Having put an enormous
amount of work into saving this business, it was a kick in the nuts when
they announced they were shutting up shop.'

The hourly paid shopfloor workers have already disappeared. The managers
are likely to follow suit when their contracts expire on Friday. Yet
Sturmey Archer should have been a tale of UK export success with nearly 90
per cent of its sales overseas.

Lenark executives declined ... Article continues below

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peak to Financial Mail, though they issued a
statement saying they were 'upset' about Sturmey Archer and felt it should
have continued to trade. Lenark intends to ensure that a number of 'issues'
about the final days of the company will be raised at the meeting of
creditors on October 2.

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