Intro to AFT Assist:

AFT Assist work closely with Insolvency Practitioners, helping Directors to find solutions to their personal guarantee and overdrawn directors loan account liabilities following the insolvency of their company.

AFT is headed by Gary Whitehead who, after a 30 year career in lending, set up AFT in 2014 specifically to help directors when they need it most. 

Over the last 9 years AFT have successfully helped hundreds of directors navigate through the personal financial ramifications of a company insolvency, providing sensible settlement solutions which can frequently include some element of debt forgiveness.

AFT also work predominantly on a success basis, with the majority of our fees only being charged if we deliver a successful outcome for our clients.

Personal guarantees come in all shapes and sizes so to speak. They can be extensive separate documents or just a couple of lines included within the body of another agreement or even an application form.

However, they are probably the biggest worry for a Director whose business is facing insolvency. AFT can remove the stress of dealing with these liabilities and we have a proven track record of obtaining excellent results for our clients.

We are also seeing a significant increase in directors with overdrawn loan accounts and, in the majority in cases, they seem to have been unaware as to the extent and financial implications.

Insolvency Practitioners do of course have a duty to investigate and recover this debt from the directors which can be difficult, especially when the director seems oblivious to the issue. 

An introduction to AFT can help in these circumstances. We will then liaise with the director to review the overdrawn loan claim and then put forward sensible proposals to deal with the resultant position.

Our focus is always to assist directors when they need it most. However, we also want to be regarded as a valuable partner for Insolvency Practitioners who, by making an introduction to AFT, can provide a more rounded services to directors when they are discussing the insolvency of the business.

When is a default due to Insolvency not a default?

There has been an interesting and somewhat landmark ruling in the ongoing Lehman Brothers court case.

Lehman Brothers International entered administration in 2008 as a result of its involvement in the suboptimal mortgage crisis. At the time, Lehman Brothers was party to two interest rate swap transactions with FR Acquisitions Corporation Ltd and JFB Firth Rixson.

Under the interest rate swap agreements, Firth Rixson owed Lehman Brothers more than £8 million. However, the ISDA Master Agreements governing the Swaps contained a term that made any payment obligation arising under the transactions subject to the condition precedent that “no Event of Default or Potential Event of Default with respect to the other party has occurred and is continuing”.

The administration of Lehman Brothers was highly successful, with the Administrators having paid in full (or fully reserved for) all provable debts (including subordinated debts), statutory interest entitlements, and non-provable liabilities.

The Court found that, if and when the Administrators have been discharged and a notice has been published that Lehman Brothers has surplus assets over liabilities and is able to pay its debts as they become due, (a) no Event of Default will be continuing under the ISDA Master Agreements, and (b) Firth Rixson will have a contractual obligation to pay the sums owing to Lehman Brothers under the Swaps.

For more information about the ruling, visit Insolvency Insider

Tailored business loans

Interest Rate Hedging Products (IRHPs) and in particular interest rate SWAPS have been widely publicised following the FCA scheme that was set up to ensure banks provide compensation to SMEs adversely affected by these products.

Most businesses are unaware they can obtain compensation in relation to the misselling of Fixed Interest Rate loans (sometimes referred to as Tailored Business Loans) which are not regulated by the FCA and not included within the FCA compensation scheme.

These fixed interest rate loan products were actively sold by some banks and were specifically designed to avoid FCA regulation. They generally included an IRHP embedded within the loan and therefore carried the risks of an IRHP product but without the safeguards provided by the FCA.

The loans were sold on the basis that interest rates would increase without adequate disclosure of the risks and implications of the product, especially in a prolonged low interest rate environment. This can result in serious business debt problems.

AFT have helped clients obtain compensation for these products even in cases where the loan has been repaid and the clients have moved banks.

Global Restructuring Group (GRG)

The Global Restructuring Group was a separate division of Royal Bank of Scotland which was established to manage business clients who might experience financial difficulty. However a number of serious allegations have been raised about GRG’s actions as the group’s aim was to secure as much profit as possible for the bank rather than to help turn around the businesses transferred into it.

First highlighted by Lawrence Tomlinson, the actions of GRG included charging extortionate fees, aggressive debt restructuring and debt for equity swaps.

The bank also used another of its divisions, called West Register to buy assets of companies managed by GRG and there are examples of the bank actively looking to create a default on a loan facility in order to justify transferring a business to GRG.

RBS has now released a formal apology for its actions and has set aside £400m to compensate customers affected by GRG.

If you would like to discuss how your business has been affected by GRG’s actions please get in touch.

Enterprise Finance Guarantee (EFG) Loans

EFG is a government-backed scheme designed to promote lending to small businesses that would not normally be able to obtain funding due to a lack of or insufficient security.

The government provides the lender with a guarantee for 75% of the loan in order to share the risk should the borrower default. However the borrower remains liable for the full amount of the loan and the lender must realise any security obtained from the borrower before it can rely on the government guarantee.

While the purpose of the EFG scheme is to promote lending to small businesses some borrowers have expressed concern that it has been used by banks to enhance their own position with little or no benefit to the borrower. In addition some borrowers have been led to believe that they would be supported by the Government guarantee and, as a result, they would only have to repay 25% of the loan.

If you have obtained an EFG loan and would like to talk through your particular circumstances please get in touch.

Interest Rate Hedging Products

We have been actively assisting our clients in getting financial compensation from banks involved in the misselling of Interest Rate Hedging Products (IRHPs).

An interest rate SWAP is a type of complex financial derivative (an IRHP) although there are other products, including CAPS, COLLARS and many more.

IRHPs were marketed on the assumption that interest rates would increase, but they were overly complex and speculative instruments. Banks encouraged the sale of these products to their customers and in many cases the full implications and risks were not disclosed.

The compensation for those companies affected by the banks’ actions comes in two parts:

• Basic redress – the direct costs paid by SMEs for these products
• Either a rate of interest paid on the basic redress sum, or an amount equivalent to other losses incurred by the SME as a result of being deprived of the funds. This is commonly referred to as “consequential losses”

Most banks have agreed to repay basic redress claims, but have been less forthcoming in accepting consequential loss claims.