Clients withheld more than £2m from Readie Construction after it stopped being able to obtain bonds, according to a new report published yesterday.
A statement of proposals from administrators at Begbies Traynor gave more information about the circumstances leading to the company’s collapse, based on information provided by director Stuart Read.
The report added that most subcontractors stopped attending its sites before the £421m-turnover contractor (55th in the CN100 2023) officially went into administration.
Readie, which went under in February, slashed its staff headcount from 275 in 2023 to 165 in January 2024. The firm had struggled for months as it was hit by inflationary pressures and supply-chain failures.
Earlier this week it emerged that the industrial and logistics contractor owed nearly £25m to its supply chain when it went under. Its total debts amounted to £34m.
Supply-chain issues Readie experienced included the collapse of two of its largest mechanical and electrical subcontractors, which were unnamed in the report. Their failures hit Readie’s margins due to delays to completion dates.
The report also cited the failure of two main contractors in autumn 2023 for reducing the availability of trade credit insurance and bond surety markets.
Readie directors tried to obtain a rolling credit facility from banks but were rejected. They were offered a £5m confidential invoice discounting facility but company guarantors blocked this due to concerns over the securities that would be required.
By January 2024 bond sureties advised they needed directors to inject liquidity into the business through a loan. The report says that this was not possible, and bonds were therefore no longer viable.
At the same time, clients began to withhold extra retentions cash in place of bonds.
According to the report, more than £2m was withheld by two clients in December 2023 and January 2024. The clients concerned are not named.
Two directors were in discussions with a potential buyer for the company in late January and early February. The administrators’ report stated that the buyer decided not to proceed.
It also notes that such a sale would have taken between six and nine months to complete and that given its trading position and creditor pressure, it was not a viable option for the administrators to attempt to revive.
The report adds that by the time the sales discussions had ended on 2 February, “the rumours within the industry were rife and most sites had no subcontractor or staff attendance”.
Begbies Traynor also revealed this week that Readie Construction’s holding company Readie Management Ltd, which is not in administration, is owed £4.8m from the contractor in an outstanding loan.
Readie Management became the parent to Readie Construction following a management buyout in 2018 for a total consideration of £36.2m.
It was again sold in 2021, that time to an employee-ownership trust, with Readie Management continuing as its holding company.
A winding-up petition has been launched against Readie Management, with a hearing due to take place on 17 April.
