Yesterday morning we received a copy of the creditors report issued by BDO on the 26th March 2020. The report details the debts, assets and creditors. We’ve broken it down into the areas we think will interest those that are following the Norton story. Take a seat and maybe grab a stiff drink, especially if you’ve placed a deposit on a bike and were hoping to get your money back.
You can read all previous three parts to Superbike’s evolving coverage of the Norton Fraud case here.
The report lists three different groups of creditors, and the amount of money owed to them. For clarity, a creditor is a person, a business or any other entity that is owed money for a providing a service, a loan or goods.
Secured creditors lend money to a business and have that loan secured against assets owned by the business. This security is logged in the particulars of a business as either a fixed or floating charge. Secured creditors are the top tier of creditors, they’re first in line to get their money back when a business goes into administration. If you think back to the Steve Murray interview, you might remember him being asked by Stuart Garner to remove the charge he had against Norton for the money he loaned to the business. The charge signified that Steve Murray was a secured creditor.
As per the BDO creditors report, Metro Bank are listed as the only Secured Creditor. Metro Bank are the company that appointed BDO as the administrator. Norton refinanced from Santander bank to Metro Bank in June 2019. On August 22nd 2019 DHL International UK Ltd issued a winding up order against Norton. A winding up order is viewed as the most serious step a creditor can take in order to get the money owed to them and usually means the companies bank accounts are frozen until it’s resolved by either paying the debt or seizing and selling assets owned by the company to the value of the debt. The winding up order issued by DHL was for £4k and was paid, so Metro Bank unfroze Norton’s banking facilities. At this time there were also two CCJ’s lodged against Norton, these were also settled.
As per the details of the credit report, Metro Bank are owed two amounts of money, one from Norton Motorcycles UK Ltd and one from Donington Hall Estates Ltd.
Norton Motorcycles UK Ltd owes Metro Bank £4.04 million not including interest and charges
Donington Hall Estates Ltd owes Metro Bank £3.07 million not including interest and charges.
So the amount owed at this point, to the Secured Creditors is £7.11 million. Yes, seven point one million pounds.
Next in line in terms of importance are the Preferential Creditors, these are the creditors that sit one above Unsecured creditors and one below Secured Creditors. Typically the Preferential Creditors are the staff from within the company that has gone into administration. Each of the preferential creditors is eligible to claim for wages arrears, capped at £800 per person. At the time of BDO putting Norton into administration, there were 64 employees. Since that day, that number has dropped to 58 people due to resignations.
A simple calculation here is 58 (employees) multiplied by £800 (the maximum amount of money each employee can claim). This amount is £46,400
If we add this to the amount owed to the Secured Creditors, we get £7,156,400. Yes, seven million one hundred and fifty-six thousand and four hundred pounds.
An unsecured creditor sits below the preferential creditor when it comes to recouping lost money. This is the group that typically gets nothing when a business goes into administration. Examples of unsecured creditors would be HMRC and customers and contractors. As per the report, the unsecured creditors are owed £6.233 million. However, BDO has determined that Norton’s most recent books and records may be incomplete and may contain omissions and factual inaccuracies. In the time since BDO has been appointed as administrator, they have received unsecured creditor claims totalling £7,195,689. Yes, seven million one hundred and ninety-five thousand, six hundred and eighty nine pounds.
Of the amount owed to unsecured creditors (we’ll go with the £7.1 million rather than the £6.2 million), £3,375,167 (3.3 million) has been listed as the amount of money paid to Norton by customers in the form of deposits for motorcycles. This amount comes in the form of monies paid to Norton by 466 customers.
Now, we’re just going to copy word for word what is written in the BDO report about this amount of money (3.3 million) and that group of people (466 people that placed deposits).
“These monies were not ring-fenced in a separate bank account and therefore no funds are available to return to impacted customers from this source.”
So aside from HMRC not likely getting the £695,097 that they are owed, as it currently stands none of those that placed a deposit for a Norton will get anything back.
If we add the amount owed to Unsecured Creditors to the running total, we get £14,352,089. Sorry if you’re bored of this format but yes, that’s fourteen million three hundred and fifty-two thousand and eighty bastard nine pounds.
Well yes there is, actually. The shareholders of the business patiently wait in line behind the secured, preferential and unsecured creditors, they get to pick up the scraps after everyone else has had what they’re owed. In the case of Norton Motorcycles, we are now talking about all the pension holders who had their pension funds invested into Norton Motorcycles by Stuart Garner in his capacity as trustee of those pensions funds. This amount comes from approximately 228 pension funds that total (to date) a minimum of £14m.
How much for the lot mate?
If we add the running total to the amount owed to those that had their pensions invested into Norton, we get £28,352,089. One more time, that’s twenty-eight million three hundred and fifty fucking two thousand and eighty nine pounds.
Debtors are people that owe the company money. At the time of the report, Norton was owed £860k spread across 57 debtors. Of those 57 seven debtors, two debtors alone owe £798k which relates to licensing agreements.
As per the report, recovery of this money is currently uncertain.
Cash at Bank
Cash at bank is any money that the company has in the company accounts, of which one was at Santander and one was at Metro Bank. A sum of £15,072 was in the Santander account, a cheque for that amount has been paid from Santander into the BDO bank account. A further $211,000 (dollars) was in a Metro Bank account. Metro has already confirmed that they’ll be keeping that. Remember Metro Bank are the only Secured Creditor and are allowed to take this money.
When a business goes into administration, a statement of affairs is a critical document in determining exactly what the assets, liabilities and charges relating to a company are. It is the responsibility of the directors of a company to file a statement of affairs to the administrators. At the time of the report being published (26th March 2020) the directors (Stuart Garner and Simon Skinner) have yet to file a statement of affairs.
If we think back to the verified registrations of Nortons in the UK from the Spondon interview, we can remind ourselves that in 12 years of trading only 802 bikes have been registered in the UK. When you consider that there are 466 deposits made for bikes yet to be delivered (or in fact built), the amount of deposits totals 58.1 percent of the total number of bikes registered in the UK since 2008. At the previously calculated build rate of 1.2 bikes per week, it would take ten and three quarter years to build the backlog of bikes that deposits have been taken for. Of course you could assume that there was a factory of nearly build or complete bikes that were waiting to be delivered to customers when Norton went into administration.
As per the report, of the 69 bikes that were in the possession of Norton at the time they went into administration, only fourteen were considered to be bikes in the early stages of production. The report states that ‘There were no completed motorcycles awaiting collection by customers’.
twenty-eight million three hundred and fifty fucking two thousand and eighty nine pounds. Possibly less. Possibly more…
The report will eventually be filed at Companies House, you should be able to read it yourself.