A Greater Manchester company that provided advice and support for people across the UK to help them manage debt entered administration owing more than £26m, it has been revealed.
The Iva Advisor had administered over 8,500 cases from its base in Cheadle and employed 48 members of staff when FRP was appointed to oversee the business on August 10.
Immediately after the appointment, 29 employees were made redundant, followed by two more on August 31.
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Approximately 8,000 of the company's individual voluntary arrangement (IVA) clients have now been transferred to Salford-based insolvency management firm Anchorage Chambers.
According to a new document filed by FRP with Companies House, Balbec had advanced £26m to the company since May 2021. The money was mainly used to purchase IVA cases from lead generators.
Preferential creditors are also owed £72,000 for arrears of pay, unpaid pension contributions and holiday pay.
HMRC is owed £400,000 while unsecured creditors are owed £426,702.
FRP said it is "anticipated that there will be insufficient funds" to pay back preferential, HMRC or unsecured creditors.
The document also reveals that the company turned over £7.1m in the six months to June 30, 2022, but made a pre-tax loss of £122,000.
On the events leading up to entering administration, FPR said: "The business grew rapidly and associated costs increased significantly, as a result putting considerable strain on cash flow.
"As a result of this and in attempt to control costs, the company intended to fundamentally change its business model.
"This would involve redundancies for the majority of the existing workforce and servicing the existing case loan via an external provider based in South Africa.
"A small administrative team would be retained to oversee case conduct and handle any queries raised within the UK.
"In an attempt to shore up cash flow and support the transition, the company was seeking a £1.5m loan, that would rank subordinate to Balbec.
"The company initially engaged FRP on 6 July 2022 to carry out a review of the company's run off model and debt servicing capacity with a view to obtaining the further funding of £1.5m.
"It quickly became apparent that given the cash flow pressures the company faced and the existing quantum of Balbec debt, that raising additional debt was unlikely.
"Discussions with the company and Balbec followed and it was agreed that the only viable option was to place the company into administration."
On the deal with Anchorage Chambers, joint administrator Anthony Collier said: "The IVA Advisor faced significant financial challenges that resulted in the decision to place the company into administration.
"Securing a new provider had been a key priority for us and we aim to deliver as smooth a transition as possible to protect existing clients.
"We’ll continue our communications with creditors as part of our statutory duties and support staff impacted during this difficult time."
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