CASE STUDY Construction – Cash flow challenges
The cash flow challenge
Opus Restructuring & Insolvency was able to add significant value to a £4m high specification 6 unit residential development project which faced cash flow problems, and on which all work on site had stopped, with the site being 75% complete. Due to greater than expected groundwork costs the developer had run out of working capital. The units were structurally complete but required internal finishing however the primary lender was faced with little option than enforcement action and to sell the units in their uncompleted state. This would have resulted in a recovery for the secured lender only, with the second chargeholder, the developer, and the unsecured creditors receiving a nil return unpaid.
The solution – funding & project management
Opus Restructuring was able to assist the developer in the following:
- Active stakeholder management – Opus were able to engage with the primary lender and rebuild trust and confidence in the project
- Funding – £400k of further working capital was procured in order to complete the project under the protection of an Administration Order
- Budgetary and financial control – preparation of a detailed unit by unit budget and implementation of a series of financial controls to ensure project integrity
- Project Management – Opus introduced a professional project management team to the project to ensure timely completion of units, fully compliant with NHBC requirements
The result – completion of the build
- Build-out completed; NHBC certification achieved
- Completion costs were on budget
- All units now being marketed
- Current anticipated realisable values >£4m
- Will ensure secured creditors, and trade Creditors are paid in full
The strategy adopted by Opus will ensure the Developer will now recover investment capital – previously he faced the possibility of bankruptcy.