New machinery issues led to collapse at bespoke kitchen business

Bespoke kitchen furniture maker Hatt Kitchens suffered delays in projects due to issues surrounding new machinery installed ahead of entering administration.

Lee Causer and Mark Thornton, both of BDO LLP, were appointed as joint administrators of kitchen furniture manufacturer Pembar Limited, trading as Hatt Kitchens, on 15 May 2023.

Ahead of entering administration, the business invested in new machinery to meet an increased level of demand during 2022. However, the installation of new machinery resulted in quality issues and production delays, whilst delays to project commencement dates and difficulties in securing appliances also caused projects to be unfinished.

These issues had a detrimental effect on liquidity, which resulted in the company exceeding its agreed overdraft facility. This led to the business exploring refinancing of the company to secure additional working capital. A preferred lender was identified, however, after an adjustment in cash flow forecasts, more funding was needed to meet requirements, which was estimated to be around £2m by the end of July 2023.

Alongside this issue, the company saw credit with suppliers evaporate, with some threatening winding-up action over unpaid debts. With no additional funding in place, and mounting cash flow issues, the business ceased operations on 28 April 2023.

It was intended to secure a prepack sale upon entering administration, however, after a marketing period which saw seven parties declare interest and an offer deadline extension, three parties tried to move forward with a deal. “Unfortunately, all credible interest was withdrawn by 23 May 2023 with no offers received,” administrators said.

Due to the unsuccessful attempts at securing a sale, administrators pulled the marketing process to focus on realising company assets on a break-up basis.

The business owed preferential creditor employee claims £119,000, which is expected to be repaid from realised assets of £283,000. The HMRC is owed £229,000, while Lloyds Bank is owed £629,000. As for unsecured creditors, claims totalled £3.9m, with a further £940,000 owed to employees. It is expected that creditors will suffer a shortfall of £4.6m.

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