Relax Group/Synergi goes into Administration

[DoctorInternet]

Do you know what happened to the MBO that Carl was trying to put together, do you think that it must have fallen through? When liquidation prevails do you think there will be anything at all left for the shareholders?
I've already written off the spread bet I had with Relax Group and moved on, but some clarification would be very helpful, as information from them is scarce.
Thanks Melanie in advance

[DoctorInternet]

With respect to Andy Davie above, I have to say that to buy a debt off a company only to push it into administration afterwards is a rather cruel way to treat a company and its employees in a country which is starting to come out of recession.
It seems greedy, selfish and unfair on the company and the 230 employees to act in such a way as to buy off a debt only in order to make a lot of money out of their assets, especially just before Christmas. IMO the banks could have helped Relax through this with a cash injection I'm sure, and definitely a change of management on the part of Relax Group. Instead, someone makes money out of the expense of others. Is this bad management or what [?][^].

[MelanieGiles]

I have no knowledge of who Carl is or the nature of any MBO offer which was being made - although I gather than the Administrator reviewed interest from a number of parties following his appointment.

I am aware that the business and its assets were being marketed for some time prior to the administration, and that the group had been struggling for some time. Whilst the outcome may not be satisfactory to a number of parties, I think we must remember that a number of jobs in the Group have actually been saved, and that clients subject to IVAs and DMPs have now been given an element of certainty about their cases.

The Group's failure may well have been down to bad management - and probably over-optimistic acquisitions - however I don't think that we can blame the purchaser for stepping in and taking a commercial decision. I have myself purchased two portfolio's of cases in the last two years, and it is not the easiest task getting to grips with non-performing cases in an attempt to turn them around.

[kallis3]

I believe the company had already gone into administration before Cleardebt bought the IVA division.

I believe the employees still have a job, but I think that any speculation should await a reply from Size5 who is an employee of Cleardebt and does know what is going on.

[synstaff]

In response to the above,

The company was in discussions with the bank for months before cleardebt took over, the company did recieve cash, but it was already doomed.
A change of management did happen with the founder and long term CEO being replaced, as with the FD.

In relation to carl, if you mean the sales and marketing director, he was, from ground level percieved to be the major reason the company went, employing to many staff with the promise of 'quality' leads time and time again which never arised.

However cleardebt took over the company, and if it did happen like Doctorinternet suggests at the end of the day its a business decision, and sometimes decision are hard to make, but if its to safe some, but not all of the staff then good on them. Despite ongoing issues at synergi the majority left were gald of what happened and managed to enjoy a 'normal' xmas.

Please note these are my OPINIONS only and shouldnt be taken as fact, at the end of the day we only got told limited info from the top.

[DoctorInternet]

What I don't understand is why ClearDebt bought the debt off Relax Group if the company was already 'doomed', why didn't they just buy off their assets? Should the shareholders have been informed? (I'm not actually a shareholder, I just opened a spread bet in Relax.)
Also, as ClearDebt bought the debt off Relax Group, wouldn't it have made more sense to have bought the whole company also, as perhaps they would have had more chance of recovering their debt? How many employees actually lost their jobs, or are soon to lose their jobs?
This one still puzzles me, I've written off the spread bet completely, and would never open another in such a company again, but I am still very curious about all that has happened, and whether the management of Relax Group will face any disciplinary action.
Does anyone have any answers?
Thanks in advance

[MelanieGiles]

These questions may be better posed to the Administrator than on a forum which exists to provide support to individuals in financial difficulties. So far as I am aware, ClearDebt bought none of the debts of the Relax Group, so you may be getting a little confused in the order of chronology which led to them acquiring the IVA and Trust Deed book.

[kallis3]

I do agree Melanie. Only the companies involved know what has happened and we shouldn't be speculating about it.

[DoctorInternet]

I can see your point Melanie, but as I've said, I'm not confused with the chronology, ClearDebt did buy the debt of Relax Group from Barclays for about 4.7m; from the Telegraph:
"David Mond, the chief executive of debt relief company Cleardebt, has put a struggling rival group into administration three days after he bought its bank debt from Barclays"

[MelanieGiles]

I think that you will find that that particular transaction had nothing to do with ClearDebt. The purchase of Barclays debt was effected by David Mond personally and not his company.

[DoctorInternet]

Melanie, I'm confused about why David Mond would buy a very large debt off a completely bust and potentially liquidated company though but, as you've said, I'll try to contact the administrator, in the meantime I'll try to sort my own debt out:
"Mr Mond last Friday bought up debt in Relax Group from its bank at what is believed to have been a deeply-discounted price. Mr Mond, who had become a large secured creditor of the company through the purchase, then appointed Jonathan Avery-Gee of Kay Johnson Gee as administrator on Sunday."

[MelanieGiles]

Yes - I am fully aware of all of the press comment surrounding the deal, and think that you are better off contacting the Administrator if you have an interest in the company or any other right to have this information.

[Adam Davies]

Hi
David has asked me to post this report that appeared in Crains, 4th Jan, as a response to the above posts


David Mond, chief executive of debt resolution firm ClearDebt Plc, has described his swoop on stricken rival Relax Group Plc as “an investment punt”.

Mond personally bought Relax's £4.7m debt with Barclays and put the company into administration before Timperley-based ClearDebt agreed a deal to buy its assets in December.

It emerged with 2,400 individual voluntary arrangements, 1,300 protected trust deeds (the Scottish equivalent of IVAs) and 2,800 debt management plans. ClearDebt, which earns fees from debt resolution agreements, arranged 483 new IVAs in the year to June 30, 2009.

Mond told Crain's that 16 or 17 other debt firms expressed an interest after BDO were brought in by the bank to review AIM-listed Relax, formerly known as Debts.co.uk, after it got into difficulties.

“At the time of personally taking the security from Barclays it was purely an investment punt,” Mond added. “If the administrators were going to sell the business after that, they would sell to the best possible bidder. I may have got it, I may not have got it.

“I wouldn't say it was a no-lose situation, I was taking a punt on the security because no due diligence had been done.”

Obstacles

ClearDebt agreed a deal with administrator Jonathan Avery-Gee, of Salford-based Kay Johnson Gee, to pay £2.7m for the assets, which were valued at £6.25m by Relax.

Mond said he expected 2010 to be “a challenging year” for debt firms because of the number of people needing help. “What banks and credit card companies have got to realise is that we are the experts in this industry and we can get for them a much better return than their own in-house departments, or even debt collection agencies, who charge 25 per cent in fees. When banks realise that and work with the industry their balance sheets will become a bit more solid.”

The Debt Resolution Forum, a grouping of 35 firms which Mond chairs, has warned that some lenders are putting obstacles in the way of insolvent debtors getting IVAs.

Mond said banks and credit card companies were submitting modifications in 97 per cent of cases, usually to drive down fees or increase debtor contributions, which could mean those on low disposable incomes are unable to get IVAs.

In 2007, when banks began to take a tougher stance on IVAs, many debt resolution firms got into difficulties because their fee income dried up.

ClearDebt's Abacus debt management arm now gets 52 per cent of its leads from the group's website and the company has also differentiated itself from competitors with an internet-based model for IVAs which is based on Kaizen manufacturing principles.

In the year to June 30, AIM-listed ClearDebt posted a profit of £461,000 on revenues of £3.4m, up from £1.8m in 2008. “We think we are very well placed,” said Mond.


Regards