Ilke subsidiary to be liquidated due to lack of funds to pay creditors

Ilke Homes’ modular construction subsidiary is set to be liquidated after administrators of the collapsed group decided there is not enough money left in the business to give anything back to creditors.

A statement of proposals published by administrator Alix Partners has also revealed that the group came painfully close to avoiding collapse in June, only for a rescue bid for the company to be withdrawn at the eleventh hour.

The statement of proposals confirmed figures contained in a statement of affairs published two weeks ago that showed the modular housing pioneer had debts of over £300m when it went under.

The document contains statements of proposals for the three Ilke group companies: Ilke Homes Ltd (IHL), which was responsible for the steel-frame modular factory in Flaxby; Ilke Homes Land Ltd (IHLL), responsible for its development activities; and Ilke Homes Holdings Ltd (IHHL), the group holding company.

Alix Partners’s proposals said that while the development business, IHLL, and the holding company, IHHL, will likely be able to recover a small amount of money to distribute beyond secured creditors, and will therefore continue in administration, there was no prospect of any creditors beyond the principal secured creditor, Homes England, recovering fundings from Ilke Homes Ltd. The document said: “The administrators therefore intend to make an application to court […] to request that the court places the company into compulsory liquidation with immediate effect.”

Liquidation is different to administration, in that it brings the end of a company by simply selling its assets and dissolving the company entirely, while administrators will seek to effectively manage the company in order to seek the best outcome for creditors.

Homes England is owed £68.8m in “secured” debt by the group, of which it is estimated it will be able to recoup just £1.14m across the three group firms. The decision to liquidate Ilke Homes Ltd confirms that none of those among its £724k of preferential creditors – mostly Ilke staff – will receive a penny back from the firm.

>> See also What went wrong for Ilke Homes?

The level of assets recoverable at IHL is worse than expected, the statement reveals, because Alix Partners now expects to be able to recoup no value at all from 60 complete housing units recovered as the business shut, following a legal claim from a supplier over the rights to the stock. In addition, it said customers of the units did not in general want them, despite having paid for them, because Ilke was now unable to provide them with the maintenance manuals for the homes, which were held electronically on a system Ilke couldn’t access “due to non-payment of a significant level of arrears.”

Staff employed by the sister development company IHLL, the statement said, will in contrast receive all their owed holiday pay and pension contributions.

The statement of affairs shows that Ilke employed 1,085 people at the moment it went under, and had development ongoing across 13 separate sites.

The document reveals more detail about the sequence of events that led to the firm’s collapse at the end of June. It confirmed that, as previously reported on Housing Today, Ilke suffered after an unnamed investor unexpectedly pulled out of a funding round in early May, which it said led Ilke to make unexpected cash calls of £10m on its backers that month and hire Citigroup to find alternative funders.

After Homes England said it would not support another funding round, the picture became more pressing, and Ilke also hired Alix Partners to pursue an accelerated sale process, which together with Citigroup’s efforts resulted in 16 interested parties.

The statement said Ilke on June 18 received a £25m bid to buy the company through a pre-pack administration process, contingent on further support from Homes England. However, the bidder withdrew the offer on June 23, and seven days later the company went into administration.

The administrators also confirm that subsequent to the administration, Ilke’s factory in Flaxby, Knaresborough was subject to a break in, and that it is in contact with insurers over the implications of the incident. The administrators promised to provide an update in a later statement.

The statement said that debts to Barclays Bank and Redlawn Land owed against a specific piece of land by the development company IHLL were likely to be paid in full, as were debts by that company to preferential creditors and the HMRC. However, it said unsecured creditors to the land company, who are owed £39.4m, could look forward to getting less than 2p in the pound back.

It added that the level of repayment of £23.9m in debts to unsecured creditors of the holdings company IHHL was “uncertain”.

According to the prior statement of affairs produced by the administrator, the majority of Ilke’s debts, £227m, are to Ilke’s equity investors, with the vast majority of the remainder to Homes England and trade creditors.