The future of a North East cable manufacturer has been secured after its creditors accepted changes to the rate at which it pays off its debts.
In 2011, AEI Cables, which employs over 200 people at its factory at Birtley could have faced administration and has since been kept afloat through a Company Voluntary Arrangement (CVA).
However, tough trading conditions meant the 84-year-old firm had to ask creditors to approve a more a manageable arrangement.
At a meeting on Wednesday, then, each of the resolutions it put forward was approved in a vote by an excess of around 80%.
AEI, which claims to be the oldest cable company in the world, was established in 1929, and despite laying off more than 100 workers two years ago, remains a well-known name in North East manufacturing.
The business currently provides cabling for numerous industries, including construction, defence, mining, oil, gas, fire protection and rail.
Under the CVA, the company had been allowed to trade under the control of the directors, while handing over 65% of its net profits to the joint supervisors Peter Kubik and Michael Kiely of UHY Hacker Young accountants, over a five-year period.
It was originally estimated this would equate to £30,000 per month, but the agreement would only be completed when all unsecured non-preferential creditors had received a minimum dividend of 30p in the pound.
Kubik explained these conditions had been result of modifications made by the company’s largest creditor, The Inland Revenue, and had gradually become unsustainable.
“AEI Cables has been paying £30,000 a month for the last two years, but it has been crippling them,” he said.
“It came to a head and they could no longer continue.”
A recent report from Hacker Young said AEI reported a loss of £377,000 for the year ended March 31, 2012, while turnover dropped from £54.7m to £28.8m.
During the period the business “experienced further aggressive competitive pressure, particularly in the house wiring cables market” while margins were hit by “a combination of low priced imported cables and volatile copper prices”.
In the year ending March 31, 2013, then, AEI reported a loss of £2.4m.
Turnover, meanwhile, dropped from £28.8m to £23.9m.
“The company had a strong order book but was unable to execute on a timely basis due to working capital constraints,” the report said.
“This impacted the sales as lead times and service levels were affected leading to a reduction in turnover.
“The overheads of the company are largely fixed at a level to support sales of £30m or higher, with significant technical, design and material development expertise, which the customer base wished the company to retain.”
AEI also predicted it would have a negative cashflow balance of over £9.2m by June 2014, with the projected loss for the year June 2013 to June 2014 being £629,000.
“They wanted to amend the original proposals in order to ensure the continued survival of the company,” Kubik said
“It is not intended to harm the creditors.
“It does, of course, affect them, but it means keeping over 200 jobs at the factory.”
The creditors agreed to scrap the divided and profit percentage requirements, accepting instead a £10,000-per-month contribution for the remaining three years of the CVA.
Kubik, who will be continuing to review AEI’s financial position regularly, said the agreement was based on the company’s current financial projections and would not require a new strategy.
AEI Cables was contacted by the Journal, but did not wish to comment on the matter.