Woollen yarn spinner and manufacturer to the carpet industry, Lawton Yarns, has been sold in a prepack deal after entering administration.
Helen Wheeler-Jones and Sarah O`Toole, both of PricewaterhouseCoopers LLP, were appointed as joint administrators of Lawton Yarns Limited on 20 December 2024.
Ahead of entering administration, the company underwent a review in June 2024 and concluded that significant cost savings were needed in order to remain a viable business and decided to outsource 50% of production to an overseas supplier as well as reduce its workforce.
During October and November, impacted employees were made redundant under this new structure, with total restructuring costs estimated to reach around £2m. Funds were needed to implement this restructuring and the company sold off surplus assets as well as considering raising its prices.
However, the sale of assets did not generate enough funds and the company could not secure additional debt financing due to its recent financial performance. Its most recent figures for the eight-month period to August 2024 showed sales of £25.6m with a loss of £500,000. Sales for the prior year stood at £32.7m, with losses of £300,000.
As funding was unable to be secured, management made an offer for all the business and assets on a pre-pack basis. Upon appointment of administrators, this sale was completed to management under LY Manufacturing Limited for a total sum of £3.3m on 27 December 2024. The breakdown of this deal included £1.5m for Plant & Machinery, £1.4m for goodwill and £300,000 for stock.
As for creditors, amounts owed to secured creditors totalled £9.9m, which is expected to repaid in full from realised assets valuing £10.5m. This is from the sale of the business and assets, as well as trade debtor realisations.
Secondary preferential creditor, the HMRC, is owed £350,000 and 53 employees are owed a combined sum of £28,000 are also expected to be repaid in full. Unsecured creditors are owed £4.7m, including £1.5m owed to 62 employees and £3.2m owed to other trade creditors. It is expected that unsecured creditors will suffer a shortfall of £4.2m.
