[Uploaded to BikeBiz.co.uk on 3rd October]
Barry Robinson of Lenark the British gambler resident in Las Vegas bravely faced a room full of critics yesterday. Critics who didnt want him to gamble with their futures.
Twelve Sturmey Archer employees, as well as three senior execs (two of them relieved of their duties by Lenark that morning), sat together and made their feelings plain. The assembled accountants and lawyers representing the larger creditors were not interested in the human angle of this story: they just wanted to rescue some of their clients cash (and earn their fees). The Sturmey crowd wanted to know what happened to their jobs and to a 98-year old company that was made insolvent not through its own making.
Some of the Sturmey staff dont know where next weeks money is coming from. They formerly collected a weekly wage in cash. Some dont even have bank accounts. In a word, theyre stuffed.
At the end of the meeting they crowded around Robinson and listened to him repeating that, given time, he may be able to rescue the company. None said they were confident he would be equal to such a task.
The meeting had started with the TV cameras and press photographers being thrown out after some of the creditors complained they didnt want to be featured in any media coverage. Print journalists kept schtum so they werent ejected.
Mid way through the meeting, once the creditors realised there was more to Sturmeys demise than simply a company trading beyond its means, there was a raucous call from the previous shy creditors for the press to be let back in. Everybody should hear this story, said the previosuly shyest creditor of them all.
This wasnt what Barry Robinson wanted to hear: he had privately requested all journalists be excluded. When this was revealed in the course of the meeting it was met with laughter and a chorus of Well, he would want that wouldnt he.
Most creditors meetings are staid affairs with little or no emotion. This was the complete opposite. Injustices had been done, thought many, and Barry Robinson was the lightning rod who attracted all the opprobium. He was not protected by the insolvency practitioner in charge who did not mince his words. He quite clearly stated that Lenarks dealings with Sturmey Archer were appalling.
Shouts of No! and gasps of astonishment came from all corners of the room as the insolvency practitioner who earlier said this was going to be a short informal creditors meeting answered the many questions from the floor.
Tony Murphy, the spiky-haired insolvency practitioner, had started the meeting by saying it was convened under Section 98 of the Insolvency Act but that the new directors of Sturmey Archer Barry Robinson and Alan Brigham did not want to liquidate the company as had previously been expected.
Murphy apologised to those present for wasted journeys but said Robinson wanted to push for adminstration, something Murphy said could and should have been raised when he started to advise Sturmey Archer two weeks previously.
Robinson was accompanied by Phil Sykes of accountancy firm Moore Stephen Booth and White. He and Robinson had revealed the surprise push for administration at 10.30am that morning.
Murphy told the meeting that in his view administration was not the appropiate course of action to take.
Why had adminstration not been mentioned two weeks ago? You cant sell Sturmey in its present form. There are also time critical matters to consider to save the business. I have been chasing Lenark executives for two weeks and nothing like this has ever been communicated to me.
Treading carefully, he added: Questions have to be asked about the Lenark group of companies.
A question from the floor was the response:
Do you have concerns about the current shareholders of Sturmey Archer? asked a pin-stripe, meaning Lenark execs.
Thats fair to say, replied Murphy, warming to his thinly veiled attacks on a group of companies he now knows well. Hes also the insolvency practitioner picking over the remains of In a Flap Ltd, a company bought by Lenark which changed into In a Flap plc. (Similarly named companies which liquidate within five years of each other usually trigger investigations whereas liquidated and administered failures often pass unmolested).
[Lenark’s envelope company In a Flap Ltd. and two subsidiary firms POS and SSS have recently been placed in liquidation. In a Flap Plc, is in receivership. A creditors’ meeting is taking place next Monday to decide whether to place a fifth Lenark company, Curvegold, into liquidation.]
Administration would be a disaster for Sturmey Archer as it would leave loose ends for many months by which time vital orders would have evaporated.
Paul Snook, the director of insolvency services at HammondSuddardsEdge of London (representing ABC Consulting) added to the condemnations by saying:
We have significant concerns about [Lenarks] tactics.
Robinson had sat stone-faced through all the barracking but was now invited to comment. He pleaded innocence and stated his case for adminstration rather than liquidation.
An administration order, if successful, will be the right thing to do. We can then sell Sturmey as a going concern. If new finance is needed we can better attract it if were in control.
Why, prodded Murphy, was this hand of Robinsons not shown two weeks previously.
I apologise for that, said Robinson. I wish I had had all the information back then.
Robinson went on to blame Sturmeys now ex-directors Colin Bateman and Paul Smith:
Some of their balance sheets have been very conflicting, he confided to the meeting.
Weve done nothing so far because we were trying to see which way the company was going. We were unsure what the tack might be. We feel jobs can be saved.
Many creditors were having none of this, they wanted to get to the root of the problems rather than listen to promises which they felt were empty ones.
How much have you invested in Sturmey Archer? asked Paul Snook, adding, mockingly, Is it zero?
Murphy interjected saying no money had been invested by Lenark but that £172 000 had been taken out so far. This was made up of two months worth of management fees and a secret bank transfer of £52 000. The meeting was then shocked to learn that a further invoice for £25 000 had been raised by Lenark for management fees even though the company had already announced its insolvency. This shocked the meeting, leading Robinson to claim the invoice was raised purely for legal requirements.
Stung by this revelation Alan Ettles, a Sturmey employee, stood up and asked Robinson why the sudden volte face:
Why now? We suspect your motives. Is it so you can get a bit more of the cake, Mr Robinson?
No, replied Robinson. Were trying to save Sturmey Archer. The previous directors were presented with a rescue package arranged through Barclays with no indemnities attached but they refused to sign it.
Incensed at this, Colin Bateman stood up, noting he was now, as of that morning, an ex-director of Sturmey Archer, he said he and Paul Smith were asked to sign personal indemnities for £750 000.
My house would have been under the hammer, said Bateman.
You were released from those indemnity clauses, claimed Robinson.
When Alan Ettles rose again to press Robinson on his possible ulterior motives for wanting administration and not liquidation, Robinson warned him and others of the repercussions of speaking their mind:
Lets be careful what is said. There may be a Black Hole here.
Somebody not fearful of a libel suit was Alan Simpson, the Labour MP for Nottingham East. He wanted answers to three questions:
1. Will Lenark make available the information on any financial guarantees made to Derby about the moving and cleaning up of the factory liabilities?
2. If Lenark were a reputable investment house which had the intention of fulfilling their obligation in moving Sturmey into a new factory why had they not approached any local or national agencies seeking help with the move?
3. What cash figure was Lenark today proposing to invest in Sturmey to carry out the proposed rescue bid.
Answering only the last question, Robinson confirmed that no new cash would be injected by Lenark. He went on to cast aspersions on the financial projections of long-time Sturmey accounts man, Paul Smith, the FD.
Tony Murphy defended Smith.
His figures are sustained by third party evaluation, said Murphy, adding that he was appalled by Lenarks delaying tactic of blaming everybody but themselves. Instead, said Murphy, it was Lenarks cash projections which were unrealistic.
We have a clear understanding of the background of Lenark. There are no illusions there, said Murphy, referring to Lenarks involvement in cases similar to the Sturmey one.
Nick Sanders, Sturmeys marketing manager for 20+ years, admitted that the technical and legal matters relating to the differences between a liquidation and an administration were best left to the experts to decipher but that it was clear the Sturmey employees had little faith in Lenark. Indeed, they had very real fears that the cash they had generated in the past two weeks to prop up the business and pay the remainder of their wages may not be safe with Lenark in the days before the High Court ruling on the request for administration.
Robinson said no funds would be touched. You can have my personal assurance that this wont happen. This led to a great many sarcastic laughs and robust comments on Lenarks track record to date.
When asked how much was at stake, Murphy revealed there were liquid assets of £820 000 (of which creditors would have got 50p in the pound if they company had been liquidated). Sturmey employees demanded these assets be frozen and Murphy asked an assistant to ring the bank to see if the cash could be protected. This settled the Sturmey employees.
Paul Snook pressed on with his demands the company should be liquidated forthwith:
Everybody wants to see it liquidated. Why not have an adjournment and let Mr Robinson think about it for ten minutes?
Snook added that there would be a great deal of opposition to an administration order being granted at the High Court so Robinson could save everybodys time by changing his mind and agreering to liquidation.
Murphy agreed to a 15 minute recess.
After the recess Murphy revealed that Robinson had agreed to the bank account being frozen, had said Lenark would pay the costs for the administration order but that liquidation was not currently an option he would consider.
At that, the meeting started to break up. However, Murphy asked for a show of hands of those who believed there was enough of a case for a DTI investigation into Lenarks 14 week ownership of Sturmey Archer. A sea of hands went up.
Alan Simpson MP said he is to ask the DTI to formally object to the administration application.
Robinson has until Wednesday night to decide whether to proceed with his administration application. If he does, the High Court will hear his application on Friday. If, instead, he prefers to liquidate, yesterday’s creditors’ meeting will reconvene next Monday.