Back in 2007, one client in the social housing sector had the misfortune to have had Northern Rock as its main finance provider. When Northern Rock hit its well publicised problems in that year, the loan book was transferred by Northern Rock to Lehman Brothers. When this latter institution collapsed in magnificent fashion in 2008, Administrators were appointed to collect in the monies due. Vague threats were then made to our client by the Lehman Brothers staff working on behalf of the Administrators regarding technical non compliance with debt covenants, which could have resulted in the 25 year loan being repayable on demand with the addition of significant penalty interest. In the past Northern Rock had issued an annual letter to confirm acceptance on these particular areas of non compliance, but there was nothing in the main loan agreement about these points. It was likely that Lehman Brothers had purchased the loan balance at a discount from Northern Rock, but it was not possible for us to determine the level of discount.

An interesting case that I was involved in a few years ago was that of a Scottish carton printer which had experienced a period of losses and therefore cash flow problems. We were brought in jointly by the company’s bankers and its minority institutional shareholder, who were both on the point of losing confidence in the company’s management, to carry out a review of the business and its financial position.

In the course of our initial review we found that the cost reductions already implemented by the management team had taken the company to breakeven. This meant that,