M&E contractor went down owing trade creditors £65m

A £15m rescue plan for stricken M&E firm MJ Lonsdale was ditched after the firm’s would-be saviour pulled out citing ‘industry administrations’.

The £250m turnover firm collapsed after more than 35 years in business at the beginning of October, with an administrator’s report saying it owed trade contractors £65m.

Over the summer, the firm thought it had stitched together a rescue plan with Arbuthnot Commercial Asset Based Lending (ABL) only for that to fall through in August.

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MJ Lonsdale collapsed at the start of October, owing trade creditors £65m

In an administrators report detailing the collapse, Begbies Traynor said the firm had ben hit by falling credit ratings, dwindling cash reserves and being asked to pay for equipment upfront.

It said the firm had been affected by labour shortages following Brexit meaning jobs started to fall behind schedule while early payments to subcontractors, to offset the impact of rising labour and materials costs, “added to the strain”. It also said the firm fell foul of “delays in negotiations and commercial aggressiveness from general contractors” while the Ukraine war led to “a surge in raw materials process, escalated utility costs, materials shortages [and] delayed deliveries”.

“The realisation dawned that the business required a cash injection in late June 2023,” the report added. It said four offers had been made with the firm deciding to go with Arbuthnot in July “who proposed a £15m asset-based loan”.

But ABL pulled out in the middle of the following month “citing concerns about timing disparities between applications, certification, invoicing and recent administrations of large construction companies”.

Begbies Traynor, who had been brought in August, said a “cash injection was crucial for the business to continue trading” and an alternative £15m loan was proposed with rival financier White Oak at the end of that month. But with time ticking, plans to ink the deal within three days “proved unattainable due to legal appointments, requiring additional time”.

An emergency board meeting was called on 28 September where the firm made the decision to go into administration at the start of the following week.

Trade creditors are owed £64.8m who have been told it is “uncertain” whether they will get anything back while HMRC is owed £1.8m. Unsecured creditors also include a £50m inter-company loan while the firm’s 265 staff are owed £2.9m but are expected to get just £586,000 back between them.

Meanwhile, in a statement ABL said it would continue to invest in construction with Kevin Barrett, managing director, Banking, Arbuthnot Latham adding: “Arbuthnot Latham has a close association with the UK Construction sector, which we already support and have recently invested further to grow our dedicated construction banking proposition.”