The news that Cleveland Bridge had to close after the last days of negotiations to find a buyer sent shockwaves around the region which will be felt for years to come among workers, customers and backers who thought this company with a global reputation was a safe place for their money and their futures.

There are so many questions left on the boardroom table alongside the failed bids of companies from around the world – what happened leading up to administration, where is all the money, what has happened to companies who lost tens of thousands of pounds – and Darlington Council who are owed more than £390,000.

Here are the key questions, and the answers that shed some light on the collapse of a North East giant.

Who's involved?

CBUK was incorporated in April 1999 and is wholly owned by ARPIC (AI-Rushaid Petroleum Investment Group) a Saudi Arabian based Oil and Gas conglomerate owned by Sheikh AI-Rushaid with his son and namesake as a director.

Financing group 4Syte, with offices in Leeds, Chelmsford and London, and the AI-Rushaid Group entered into a ‘Deed of Priority’ on 1 June 2021 giving 4Syte priority ahead of AI-Rushaid’s charge in respect of new funding.

When did alarm bells start ringing?

Martyn Pullin of FRP was approached in January 2021 by Phil Heathcock (Financial Director) to advise the Board on the Company’s financial position.

At this time, the Company forecast that it required additional working capital to allow it to meet its obligations in the latter part of 2021.

At this stage the Board were confident that the Company would be able to raise sufficient funds either from a funder or via ARPIC to meet its working capital requirements.

Why did it all go so wrong?

Heathcock listed the reasons for the emergency intervention, telling the administrators:

n There was significant delay in project start dates due largely to the pandemic, which cost the company £1.7m.

n Volumes of low margin work was not sufficient to cover overheads.

n The need for overtime working and agency staff as the delayed contracts all recommenced in and around the same time following lockdown had a negative impact on margins.

n Exceptional costs in 2020 of £1.7m which largely relate to the impact of the pandemic.

n Delay in the commencement of a significant high margin overseas contract due to a political coup in Sri Lanka.

n An estimation error on one contract resulted in a project achieving a zero gross profit. This contract is understood to have made up the £8m of production hours in Ql 2021;

n Significant increase in steel price this year which could not be passed onto customers on all contracts;

n Credit limits with suppliers (with credit insurance) were reduced due to the poor trading results for 2020 placing more pressure on working capital.

n An inability to raise adequate additional working capital.

What happened next?

Funding: The company was introduced to 4Syte who provided a funding line of £4m split between a construction finance facility and debt which could be drawn down with only interest serviced until repayment of capital was due in 15 months.

A condition of the funding was that the company secured an agreement with HM Revenue and Customs to restructure its debt over 12 months – within two months of the facility being approved.

Kinsgate: On 1 June 2021, the company engaged a team from turnaround specialists Kingsgate to provide advice to the Board and ARPIC on the restructuring of its business. Managing Director Chris Droogan submitted his resignation to the Board at this time. Kinsgate believed the Company’s refinance would provide a sound financial footing to allow a turnaround plan to be implemented.

But shortly following their engagement, it was identified that updated forecasting showed the company had a working capital shortfall as a consequence of under-delivery on revenue and needed an additional immediate injection of funding. Additional forecasting completed by Kinsgate based on the information provided by the company indicated that without any changes to the business, additional funding of around £12million would be required to fund the business until the end of the year.

ARPIC: The administrators was contacted by the company on 24 June 2021 to meet with the Board and Kinsgate team virtually. FRP was advised of the projected funding shortfall and advised that support was being sought from ARPIC. Whilst the Board considered that support would be provided, formal insolvency options were discussed and the timescales that would typically be required to deliver any insolvency strategies. The company continued to liaise with ARPIC and ARPIC’s advisor regarding the request for additional funds. No instructions were received by FRP at this stage.

Wages: On 16 July 2021 Phil Heathcock (finance director) contacted representatives of FRP to advise that ARPIC had declined to provide any further financial support to the Company. Mr Heathcock advised that the company would therefore be unable to pay wages the following week and that he now considered insolvency inevitable.

The final blow: As the company was cash flow and balance sheet insolvent, and reliant upon the financial support of ARPIC, a decision was made to approach ARPIC for a final time to request funding to avoid Administration.

The funding was not provided and the Company entered into consultation with the whole of its workforce on 20 July 2021 confirming that all jobs were at risk. Following the announcement to staff, a number of suppliers became aware of the financial position of the Company and attended site and recovered items on hire.

What attempts were made to rescue the company?

According to The Insolvency Act 1986, any administrator of a company must perform his functions with the objective of:

(a) rescuing the company as a going concern, or

(b) achieving a better result for the company’s creditors as a whole than would be likely if the company were wound up (without first being in administration), or

(c) realising property in order to make a distribution to one or more secured or preferential creditors.

FRP said: "The initial letter issued to creditors envisaged that objective (c) would be achieved. However since our appointment, we reconsidered the position and it is now envisaged that objective (b) will be achieved. This is since we were able to restart production which was not anticipated at the onset of the case. Restarting production will lead to realisations of circa £1.4m which, we consider would have been unlikely had the company been wound up.

"The Joint Administrators have generated trading sales from the sale of scrap steel stocks and from ongoing works to complete fabrication for three existing customers. The trading account currently shows a trading surplus of £752,913. This is prepared on a cash basis and does not therefore reflect future trading expenditure where undertakings have been given but costs not yet paid.

"It is anticipated that trading will be broadly break even but the main benefit derived from the ongoing trading was the securing of pre-Administration outstanding applications, and the release of retentions which would otherwise likely have been unpaid due to CBUK’s breach of the terms of those contracts.

Ransom payments

Certain ‘ransom payments’ have been levied by suppliers which are essential to the ongoing trading of the business which have been paid by the Joint Administrators.

Sums totalling £60,198 have been paid to creditors to protect ongoing supplies where deemed essential. Included within this sum is a contribution of £54,000 in settlement of a haulier’s lien which formed part of an agreement with a customer to complete fabrication works on an ongoing contract. Had this payment not been made, the outstanding July application totalling £301,828 would not have been paid.

Who else is owed money?

The primary secured creditor, 4Syte, following the application of fixed charge receipts post Administration is currently owed £2.24m. Based on the funds likely to be available, it is anticipated that 4Syte will be repaid in full.

ARPIC is the second charge holder and it is anticipated that following settlement of guarantees provided on behalf of the Company they will be owed around £8m. Based on the funds likely to be available, it is anticipated that ARPIC will suffer a shortfall.

Primary preferential creditors are currently estimated to total approximately £401,000 being the employees’ preferential element for arrears of pay, unpaid holiday pay and pension contributions as calculated in accordance with legislation. Claims are continuing to be received from redundant employees.

The total position will become clearer if a purchaser for the business and assets is found as we would anticipate that the remaining workforce, together with their respective claims would transfer to the purchaser. It is however anticipated that there will be a distribution available to preferential creditors.

It is currently estimated that secondary preferential creditors being monies owed HM Revenue Customs that qualify as secondary preferential creditors will total c£2.5m.

We will continue to review and respond to creditors’ queries by phone and written correspondence.

To date there seem to be 267 potential creditors (excluding employees) according to the information currently available. As required, the office holder will advertise for claims and adjudicate on them if there are sufficient funds to make a distribution, which now seems 'unlikely'.