Recovery First promotes complimentary services to the Restructuring and Insolvency Sector

A new company has been launched to help sell or run off those law firms working in the personal injury (PI) arena which, following 1 April changes, are considering restructure or facing insolvency.

Recovery First has been set up to assist restructuring and insolvency businesses involved with distressed PI firms. Ensuring SRA compliance, it will help to discreetly sell a PI firm’s cases to multiple purchasers and achieve a higher value for the work in progress (WIP) by removing some of the risks associated with purchasing books of business from distressed firms.

In some cases, as part of the service, Recovery First will also facilitate the availability of immediate cash to cover administration set up costs or, if simply restructuring or utilising a CVA, to deal with immediate exit liabilities.

In some cases, as part of the service, Recovery First will also facilitate the availability of immediate cash to cover administration set up costs or, if simply restructuring or utilising a CVA, to deal with immediate exit liabilities.

This does not need to be an open ended process as 100% of value can be achieved for a period and then, once significant investment m ade by purchasing firms in individual cases, a capitalisation exercise can take place on those that remain outstanding at minimum discounts.

David said: “Unfortunately the landscape for firms involved in PI changed overnight when new legislation came into place on the 1 April this year. While the revenue streams achievable on new matters from 1 April were dramatically reduced, cash continues to flow from pre 31 March engagement, masking the impact on the balance sheet. The significant asset locked in WIP on cases is being depleted without necessarily a corresponding reduction in liabilities.

“As is normal, advice is being sought very late in the day when cash inflow starts to reduce and the reality of the situation begins to emerge. This often leads to a situation where some sort of formal process is required, however by ring fencing 100% of the remaining asset for the vendor, derisory returns for creditors can be avoided and could even result in a dividend for the business principals.

“The need for transactions to be completed under the radar, quickly with minimum due diligence, has historically resulted in the value being heavily discounted to get deals over the line. Yet by creating a templated process that avoids many of the associated risks for the purchaser, we’ve been able to build an offering, supported by a robust panel of firms embracing the new world, with a starting point of ring fencing 100% of the value incumbent in the transferring files. Confidentiality is a given, with panel firms not being advised of the individual firm concerned until the operational aspects of the process are initiated.

“With the templated process, the transaction can happen very quickly. In fact, on a recent matter for RSM Tenon, now Baker Tilly, the completion of all transactional matters and the distribution of files was achieved within six working days from initial enquiry.

Recovery-news-feature-october-2013 (180.8 KiB)