ICSM BUSINESS NEWS: insolvency experts continue to unravel complex intercompany loans at Howard Hunt – three years after they went bust owing millions

By Harry Mottram: More than three years have passed since administrators were called in to the Dartford-based printing industry Howard Hunt Group with the length of time taken to unravel the finances blamed on inter-company loans.

Writing in the trade publication Print Week, Jo Francis penned: “Administrators from BDO were appointed at Howard Hunt (City), Graft Solutions, Celerity information Services, OR Multimedia and holding company Howard Hunt Mail in May 2019. 

“Connected business and limited liability partnership Celerity Communications LLP (CCLLP) also went into administration a month later. In the latest progress report, for the six months to 21 May, administrators Martha Thompson and Francis Newton said that the amount paid to secured creditor Santander UK – owed £16.5m by the businesses – had risen to £8.02m. 

“Regarding the CCLLP administration, BDO said that the members’ overdrawn current and capital accounts totalled around £1.38m, with legal firm Addleshaw Goddard assisting in reviewing and collecting the overdrawn accounts.”

Back in 2019 when Paragon Group picked up the remnants of the Howard Hunt Group in a pre-ack deal worth £9 million one of the creditors was quoted in Print Week as saying: “We have lodged a number of concerns with the administrators. It seems like the inter-company loans were about keeping the truth from the bank and keeping the credit scores up. I have to question why the directors haven’t carried out their responsibilities if the numbers are still not finalised.”

Were the loans equity?

And there’s the nub: the intercompany loans left a complex web of accounts which three years later are yet to concluded by the administrators. One school of thought echoed by that creditor is to make the accounts opaque to potentially cover up sharp practice. Is for instance an intercompany loan equity? That is the conundrum faced by administrators BDO as they made their interim reports including one to the Secretary of State over the conduct of the directors.

Professional standards are the test

Intercompany loans must be viewed through the prism of best practice for loans to be considered squeaky clean in legal terms. There is the formality of the loan agreement, the financial situation of the debtor when the creditor granted the loan and their relationship. If these professional standards are not met, then questions will be raised which is possibly one reason for the delay.

When the group hit the buffers, debts were estimated at around £40 million with the intercompany loans accounting for the lion’s share of that debt – hence the question of what debt is and what is equity. Creditors were left high and dry along with the 200 or so staff who were owed wages – leaving commentators at the time and since to raise questions as to why such a large group of firms could have got themselves into such a mess.

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For details for the work of the journalist Harry Mottram visit www.harrymottram.co.uk