Administrators warn they will recoup fraction of firm's £22m WIP

A collapsed firm’s estimated £22m of work in progress has largely evaporated to realise less than £1m, new documents have revealed.

Administrators handling the affairs of former Yorkshire firm Heptonstalls state in their latest update that around £750,000 had been realised from the WIP.

The firm’s work was valued at £22.4m when it went into administration in 2020. The initial administrators’ report revealed that auditors had already written down 70% of the expected income, but the latest update suggests even that was optimistic.

At the time, purchasers for the business, which employed more than 100 people, had offered to pay 25% of the recovered WIP in addition to the initial sale price of £100,000.

Administrators from insolvency practice Kroll said that a ‘substantial proportion’ of WIP will not be recoverable, although this was ‘not unusual’ in circumstances such as this.

Meanwhile, a potential claim for unpaid disbursements involving the purchaser and ATE insurer appears to have stalled. Joint administrators from Kroll said the action had not advanced and the merits of any potential proceedings had not even been agreed with the solicitors who had been engaged. Indeed, those solicitors are now owed a ‘significant debt’ for unpaid fees themselves and they want these settled before any further work can be undertaken.

Lenders and other creditors are likely to be in a worse position than originally envisaged. At the time of the administration, Heptonstalls owed almost £9m to HSBC. Distributions worth £525,000 have been paid out under a floating charge over the assets of the firm, with future distributions dependent on realising any future WIP, although administrators state this will not be enough to repay the debt in full.

The administrators' initial report stated that unsecured creditors were owed £7.36m at the appointment date. The latest update revises this upwards to £12.2m, including £1.22m owed to HMRC and £10.2m in disbursement liabilities. As outlined in 2020, there are insufficient funds to enable any distribution to unsecured creditors other than the prescribed £600,000.

The fee estimate from administrators had increased from £305,000 in the original estimate to £454,000, which was agreed by secured and preferential creditors in 2021. In the latest reporting period, administrators charged for 77 hours at an average hourly rate of £341. A two-year extension to the administration has already been approved, with a revised automatic end date of September 2024 now in place. Administrators said they are unlikely to be in a position to close the administration prior to the automatic end date.

Hepstonstalls was acquired in 2020 by HH Legal, which itself closed in 2022 when it merged with Yorkshire firm Cordus Law.

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