The inner financial workings of King & Wood Mallesons‘ (KWM) failed European arm have become evident in the joint administrators’ proposals report, issued last week.
As reported yesterday administrators estimate that there will be a £33.5m shortfall to unsecured creditors. Total unsecured debt topped £37m at the legacy SJ Berwin practice.
The report also reveals the firm’s financial state in the months leading up to the administration, as well as what investigations continue into the legacy practice.
On 30 September 2016, KWM had £39.5m in equity reserves when the firm’s liabilities amounted to £63.4m. With various partners departing in the first part of 2016, the firm lost £11m in equity reserves from April 2016 to September 2016, and had £15m less capital in Autumn 2016 than it had in April 2015.
Also according to the report, as of 30 September 2016 the firm had £63.4m worth of liabilities, £5m more than 30 April 2016, and it had £11m less net assets in September 2016 than it had in April last year.
Among KWM’s main unsecured trade creditors, listed as being owed the most money are former administrators AlixPartners, property consultant Knight Frank, property consultant Mace Macro, Ukranian law firm Lexwell and LexisNexis.
The administrators, Quantuma, were paid £255,172 between 17 January and 10 March, and estimate their total bill will amount to £1.3m overall for work done on KWM LLP as well as KWM Services.
Following the pre-packaged sales of WIP and accounts receivables, there were also a small number of files which remained with the firm, amounting to unbilled WIP of £943,000, unbilled disbursements of £309,000 and £1.7m of outstanding account receivables.
The entity under administration retains work in progress (WIP) and account receivables worth £3.6m from previous partner transfers and Quantuma is currently trying to collect this amount but cannot comment further on its recoverability prospects.
The administrators are currently investigating whether there is a possibility of historic business rates payments being challenged. They have also instructed independent pensions specialist Broom Consultants to review and administer the pensions scheme, while Quantuma continues to investigate those in senior management at the firm and director of services in the three years preceding administration, the circumstances for the firm’s failure as well as the affairs of the firm more widely and whether any civil proceedings should be taken.
In addition to previous reports, the proposals reveal that KWM’s Brussels office was sold on 25 January 2017, including £650k in work in progress (WIP) and accounts receivable (payable in three instalments throughout 2017) and £253k in cash.
KWM’s Germany offices in Frankfurt and Munich are also currently in the process of being closed and all employees have been made redundant – the administrators entered into negotiations with both landlords of both offices to secure ongoing occupation, admins paid property and payroll costs for a period of time for gross realisations of 3.4m Euros to date in WIP and account receivables.
The report also reveals that KWM Europe LLP, the new entity which KWM China retained, bought the SJ Berwin name, goodwill and all remaining archived files, closing the chapter on what was once legacy SJ Berwin.