Updated: RBS may write off £15m as Halliwells sell-off generates £7m
Author: Claire Ruckin and Suzanna Ring
29 Jul 2010 | 00:48 | 10 comments
The Royal Bank of Scotland (RBS) is set to write off up to £15m in the wake of the break-up and sale of Halliwells, it has emerged.
RBS, which was owed substantial sums in corporate debt and partner loans from Halliwells, recovered just over £7m from the sales, with Barlow Lyde & Gilbert and HBJ Gateley Wareing - which took the largest teams - paying £2.5m and £2.55m respectively. Hill Dickinson paid £1.88m, while Kennedys paid £125,000 for the Sheffield office.
The total is lower than the £12m RBS had hoped to receive as a result of the sales, a figure which still would have seen the bank make a substantial loss. The exact level of Halliwells' total corporate debt when it appointed BDO as administrators remains unclear, but in February, when the firm renegotiated its debt with RBS, the figure stood at around £22m.
An RBS spokesperson confirmed that the bank stood to "write off up to £15m" in the wake of the sale, which concluded last week (20 July).
As part of the deal, Hill Dickinson and HBJ Gateley have imposed lock-ins on the joining equity partners, committing them to remain at the firm for a set period of time. It is unclear whether either firm will financially assist joining partners in meeting their outstanding capital contribution loans from Halliwells; however, both Barlows and Kennedys have said they will assist their new joiners.
Hill Dickinson, HBJ Gateley and Barlows have also committed to retaining all 78 central services staff until September under a Transitional Services Agreement.
BDO has turned to CMS Cameron McKenna banking partner Rita Lowe for advice on the administration process, which is expected to last about a year, as BDO partners Dermot Power and Shay Bannon seek out potential recovery for creditors.
BDO will look closely into the Halliwells' business and financial performance to investigate whether there is scope to recover any money, and as administrator has the power to bring litigation if deemed appropriate.
A report from the administrators, which has been seen by Legal Week, said that profitability at Halliwells been heavily impacted in recent years due to falling income and high fixed costs.
The report said that "notional net profits" for full year to April 2007 were £8.5m, which fell to £4m the following year. For the full year April 2009, the firm recorded a loss of £1.8m, according to the BDO report.
The report also says that Barlows has committed to guarantee or replace professional practice loans up to a liability cap of £1.49m.
COMMENTS(TOTAL 10 COMMENTS)
Liquidation
What provisions are there for a liquidator of an LLP to re-open (and potentially reverse) earlier deals in order to clawback the reverse premium payments?
David Meynell -29 Jul 2010 | 09:47
Halliwells Sell Off
But what did they actually PAY for? Just the WIP and Debtors?
Just Interested.... -29 Jul 2010 | 09:50
Administrators Report
The administrator's report suggests a loss of £1.8m April FY 09. Were the FSMs who were asked to contribute capital of £10k-£20k (depending on salary) advised that the firm was likely to file accounts indicating a significant loss at the time when they were asked to contribute capital?
Any FSMs wish to comment on what information was provided to them when they were asked to contribute capital? Did the other equity partners know that the firm was making a loss when the second cash call was made? Interesting times.
Interesting -29 Jul 2010 | 10:27
Information to FSMs
Not a lot, not a lot. Of course, we're only lawyers so we wouldn't understand what we were being told but it was odd, wasn't it?
FSM 1 -29 Jul 2010 | 10:54
Where's Alec Craig then....
And would he like to comment on this:
"ALEC CRAIG - HALLIWELLS
As much businessman as corporate lawyer. We’d like to say that Alec Craig does a lot of his business on the golf course, but then we might need to call Mark Manley (qv). The blunt-speaking Craig is a major reason why Halliwells continues to be one of the North West’s leading law firms. A lawyer who is capable of bringing eyewatering deals into the region. Was once asked the secret of growth and replied: “You need to get one big-name leader and then younger lawyers will follow.” That remains the case and he is the big name."
City Woman -29 Jul 2010 | 11:12
Alec Craig became chairman of a new broker, XCAP Securities, just over a month before filing notice of intention to appoint an administrator.
Craig Watch -29 Jul 2010 | 13:00
Very wrong
Come on, this absolutely stinks. Why has this not been fully reported in the national papers?
Taxing Ted -29 Jul 2010 | 20:15
State owned bank doesn't pursue lawyers
What is going on here? How can state owned RBS justify not pursuing the partners for £15m taxpayers' money?
John Smith -29 Jul 2010 | 21:47
two-word answer to claw £15m back
Property deal...
investigate, litigate and claw back.
Anonymous -30 Jul 2010 | 15:25
Best Interests and Good Faith
The equity partners who took the reverse premium had a duty of good faith to those partners who received nothing. There is also a duty to act in the best interests of the LLP. Exactly how can it be in the best interests of the LLP to take £17m out of the LLP and replace that with borrowings of £18m?
Simples -31 Jul 2010 | 08:49
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