Cambridgeshire-based merchant Wellgrain went into administration on 2 March owing at least £15m to almost 300 creditors.
Matthew Richards and Daniel Smith of Grant Thornton were appointed administrators to the company at the request of its directors.
Many farmers are among the unsecured creditors and their prospects of a payout were uncertain, Mr Richards told Farmers Weekly.
“Staff were sent home on 22 February because the directors felt they could no longer continue to trade,” he said. The reason behind this was still being established.
Wellgrain has ceased trading and was not likely to restart, said Mr Matthews. All but three of the 31 employees were made redundant following the appointment of administrators.
Wellgrain fact file
- Established in 2003
- Most recent accounts (to 30 June 2015) show a turnover of almost £86m, profit before tax on ordinary activities of £214,896, and net assets of £2.7m
- At that time it had about 30 staff
- The next annual accounts are due to be filed by 30 March
- Wholly owned by parent company, Driftwell Investments, which is not in administration
- Driftwell had a turnover of £93.154m in the year to 30 June 2015, for which the accounts show the company was 86% owned by Mr Spinney and his wife
The creditors list ran to 286 names on Tuesday (7 March), with NatWest and RBS Invoice Financing the only secured creditors, giving them first call on any cash from the administration process.
Invoice financing allows money to be borrowed against the value of unpaid invoices and stock.
As well as growers, the unsecured creditors include international and domestic grain traders, hauliers and other suppliers.
The amount owing to creditors was likely to rise for several reasons, including breach of contract claims as yet unstated, said Mr Richards, who could not say how much was owed to growers.
However, Farmers Weekly understands that at least two growers are owed £100,000 and that these are not the largest grower claims on the company.
By law, the administrator has to produce proposals within eight weeks of appointment. This will include a statement of affairs by the directors, a creditor list and plans for an exit route for the company.
That exit route would depend on how much was raised by the sale of assets, said Mr Richards. Whether a creditors’ meeting is held would depend on how much was raised through the sale of assets, he said.
Wellgrain’s assets are grain stocks in store and debtors – those who owe the company money.
Mr Richards could not say how much Wellgrain’s assets were worth, as the ownership of some assets was yet to be ascertained.
The company was established in 2003 and its most recent accounts – made up to 30 June 2015 – show a turnover of almost £86m, a profit before tax on ordinary activities of £214,896 and net assets of £2.7m.
Help and support
Help and support is available for those affected by the administration of Wellgrain:
- Rabi 0808 281 9490
- The Farming Community Network 03000 111 999
- The Samaritans 116 123
- You Are Not Alone 0300 323 0400
Luke Palmer farms in Cambridgeshire and is chairman of the NFU’s Ely and Soham branch. He is owed money by Wellgrain for two loads of wheat delivered on the morning of 21 February. The next day, collections from farms ceased.
He has spoken to many other farmers who have supplied the company but not been paid. He fears the knock-on effect through the trade and supply industry.
“The key thing if you are owed money by Wellgrain and it’s going to cause you a problem, is to talk to the people you owe money to and get something put in place. The NFU is able to help and give advice, too.”
“The biggest problem for farmers is that we’re not insured for this. Some of the stories are heartbreaking to listen to – January is big loading-out month for farm grain. This could have a bigger impact than the flooding, but it’s more hidden and there’s no compensation.”
NFU acting senior legal adviser Lucy Ralph said the union was working to provide guidance to members affected by the Wellgrain administration, and members should contact NFU Callfirst (0370 845 8458) as soon as possible.
The administration of Wellgrain is complex and exactly what gave rise to it is unknown at this stage.
Tees Law, an NFU panel firm retained to advise members, is addressing the main questions:
Will I be paid for grain I have delivered to Wellgrain?
You will be an unsecured creditor, after any secured (such as a bank) or preferential creditor (employees).
There is a real risk that you may receive nothing or only a few pence for every pound Wellgrain owes you if it was delivered before the administrators were appointed.
I have a forward contract to deliver grain to Wellgrain – does the administration cancel my obligation under this contract?
Whether a contract is discharged by insolvency depends on whether the insolvency of either party is a termination event under the contract.
We cannot give definitive advice without seeing individual contracts. However, most standard form contracts will have such a clause.
We believe it highly unlikely that the liquidator will require any grain contract to proceed – anyone affected in this way should get advice.
Wellgrain owes me for grain delivered before the administrator appointment and I owe Wellgrain for pre-administration purchases – can I offset what I owe against what the company owes me?
If there are mutual dealings between a farmer and Wellgrain, it is the net position, taking account of debts either way, which is relevant. Offsets will generally apply.
I have my own grain in a Wellgrain store, which I am paying the company monthly to store for me – what is the status of that grain?
We are currently investigating with the position relating to grain stored with Wellgrain. Title to the grain stored does not vest in the administrator and remains the property of the farmer.
The difficulty may be in identifying the relevant grain; assistance is likely to be needed in this regard.
Tees Law will advise any farmer on Wellgrain issues – call partner David Perry on 01245 293 190 or email firstname.lastname@example.org
Has the Wellgrain administration affected your business? Get in touch with Farmers Weekly, email email@example.com or call 0208 652 4923