Nearly 20 jobs have been saved in a pre-pack deal involving a Tyneside metalwork firm that provided work for the subsea, offshore and renewables sectors.
Administrators were appointed to AAP Metal Fabrication Ltd in Jarrow last month after it hit severe cashflow difficulties. Four of the firm's 23 staff were made redundant just prior to insolvency experts from FRP taking control of the company.
The move came just under 18 months after the business had been sold in a £1.8m deal to Sussex-based business, DINH Ltd, whose director also owned Washington Waterjet Ltd, which was liquidated in February this year. At the time of the acquisition, DINH - backed by £250,000 of funding from Finance For Enterprise - had hoped to expand AAP and was eyeing the creation of jobs.
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But a significant drop in turnover this year brought challenges. The firm had been used to monthly turnover of around £200,000 but this fell away to about £31,000 - creating cash flow difficulties and putting the firm behind in payments owed to HRMC, suppliers and lenders. Directors had put money into the business to keep it trading but were unable to sustain heavy losses.
Insolvency experts were subsequently called in, leading to a pre-pack deal with AAP Welding and Fabrication Ltd, which is owned by one of AAP Metal's directors. The £160,000 deal has saved 19 jobs with administrators saying it has also raised the prospect of returns for creditors.
A statement of affairs shows more than £844,000 owed to a range of creditors at the time of the administration, including more than £378,000 owed to the tax authority and more than £126,000 owned to Ultimate Finance, among sums also due to suppliers.
Writing in a report on the administration, FRP said: "Due to the company's trading losses in the current financial year, it began having cash flow difficulties which resulted in it struggling to pay its liabilities as and when they fell due. The company started falling behind with its payments to HMRC in August 2024.
"The company entered into a Time to Pay Arrangement with HMRC, but this strained the company's cashflow further, impacting upon its ability to make payments to its other creditors. As the company was unable to maintain the payments under the Time to Pay Arrangement, this was ultimately referred to enforcement by HMRC.
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"In addition, the company had taken out a number of loans when the company was in a strong financial position. These financial commitments became increasingly difficult to manage whilst trade was in decline.
"Due to the Company's deteriorating cashflow position, it had also fallen behind with a number of supplier payments and had been required to make proforma payments to release materials and services so it could finalise projects. This further depleted already limited cash reserves."