Bristol property developer millions in debt
Edward Ware Homes Ltd, which is based in Clifton, struck a deal to keep trading after being hit hard by the slump in the housing market.
The agreement means that the company can continue to trade but more than 200 creditors – including plasterers, architects, engineers and decorating firms – will get just £2.50 for every £1,000 owed to them.
Company director Edward Ware, who established his first building firm in 1997, blamed the problems on "an industry in meltdown", and said that he and his colleagues were doing everything in their power to resolve the situation.
He said: "As far as the directors are concerned we are trying to do what is right by the people we owe money to, and we are trying to be nothing but honourable."
Edward Ware Homes has experienced major problems in the last 12 months. Turnover has plummeted from £11.4m in 2007 to just £673,000 this year, and the company has posted losses of £3.8m. More than 60 per cent of staff have been shed, and in the last three months four directors have been made redundant or resigned.
In April it pulled out of plans to develop 400 homes at the Greyfriars site in Gloucester and the company has moved offices from Whiteladies Road to Oakfield Road, Clifton, and its website and phone number are currently unavailable.
Facing a situation of owing more than £5.1m to 211 creditors, including 73 from the Bristol area, it entered into a Company Voluntary Arrangement (CVA) on August 8, where money is paid into a scheme so that its creditors are paid back a proportion of what they are owed
The arrangement, set up through audit, accounting and business services firm BDO Stoy Hayward, is to stop the company going bust, and means businesses owed money will receive more in the long term than they would if the company was liquidated and its assets sold off.
But for now they will only get a tiny fraction of the money owed to them, and will only get the rest if Edward Ware Homes is successful in the future.
Nigel Boobier, a restructuring and insolvency partner at law firm Osborne Clarke and chairman of the South West and South Wales region Association of Business Recovery Professionals, said such a small settlement arrangement was not unusual. He said: "The reason for companies going to company voluntary arrangements is usually because they have incurred debts that they are unable to service and they foresee a situation where they are unable to avoid insolvency.
"Sometimes the dividend is even smaller than 0.25p in the pound. This amount is not unheard of when companies go into voluntary arrangements, as creditors all look to the long-term situation."
Among the local creditors, Yate-based electrical contractor ECS (Bristol) Ltd is owed more than £15,800. Greenvale Landscapes in Fishponds is owed £9,911 and Mark Breen Plastering in Emersons Green is owed almost £24,000. A £1,500 debt to charity Meningitis UK has been settled.
The largest creditor out of pocket is Edward Ware himself, personally accounting for more than 50 per cent of the debt. Mr Ware, who was made a director of Bristol Rovers Football Club in October, is adamant that the situation was unavoidable.
The 47-year-old, who lives in a £2m house near the Suspension Bridge with his wife Suzanne, said: "The business has in the space of 12 months gone from being solvent, with a land bank of 1,400 plots with very significant future profits, to something that has become insolvent virtually overnight.
"The problem is that land values have dropped by 100 per cent. Existing stock – apartments and houses you are trying to sell – has had to be discounted by up to 30 per cent. The assets of the business have become worthless – less value than the borrowings.
"The dilemma facing the directors was whether to put the business into receivership or come to a voluntary agreement with all the creditors with the view to holding some of the assets until the market recovered sufficiently to build the developments and sites on the books and pay people back in full.
"The easiest thing would have been to throw the towel in and walk away from it, but we all feel a responsibility towards our trade partners and professionals. What we have done is to protect the interests of our trade creditors and partners. What is reassuring is that I personally account for over 50 per cent of the debt. I was the majority shareholder and I kept putting in money to keep it going – more than £2m – but there was no end in sight. So it is in my interest as well as everybody else to make sure that everyone is paid. What has happened has been beyond our control completely. The industry is in meltdown.
"I think the creditors are grateful that the proposal is to trade out of it rather than throw the towel in. The market will return, whether it is next year or the year after."
Simon Girling, joint supervisor of the arrangement at BDO Stoy Hayward, said Edward Ware Homes was one of many housebuilders that had suffered because of the downturn.
He said: "The company continues to trade in its streamlined state under the CVA, in order to organise the build out of its various projects. It is hoped that the income streams deriving from the successful completion of the projects will enable payment of a substantial dividend to unsecured creditors when the property market recovers."
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