Business Advice
Funding a pre-pack administration liquidation
With the hard economic times, business bankruptcy has become a reality for many companies. To avoid this, companies are using pre pack administration liquidation. This means that the directors or shareholders of the old company form a new company and transfer the assets of the old company to the new company disposing off the liabilities. As expected, the creditors and the administrator cannot allow the business to be disposed off for a lesser amount than what they would realize if the company was declared bankrupt. This means that the directors of the older company have to raise a substantial amount in order to secure the pre-pack sale. One of the best ways to fund this purchase is through asset refinancing. This arrangement allows the directors of the new company to access funds equivalent to the assets owned by the older company. Apart from the asset security, the directors are also required to provide personal guarantees. This is not unusual since even normal lending cases require such guarantees. The value of the assets from the older company has to be substantial for perfect financing.