Michael J Lonsdale owed more than £120m when it collapsed, Construction News can reveal.
The Berkshire-headquartered mechanical & electrical (M&E) specialist went into administration in October, after 36 years of trading.
A new report by administrators from Begbies Traynor has revealed that the firm owed trade creditors £65m, employees £3.4m and £50m to connected business Michael Lonsdale Ltd for an inter-company loan.
It also owed HMRC at least £1.7m when it went under, the report says.
In its last published accounts, for the year to 30 September 2022, the firm turned over £191m. It was on course to report revenue of £250m in its completed following financial year, according to Begbies Traynor.
The administrators state that it is unlikely that the firm’s dozens of trade creditors will receive any of the money they are owed.
Lonsdale became an employee-owned trust in early 2020, and the firm’s 265 employees are set to lose out to the tune of £2.9m. However, they are set to be paid any wages, salary and holiday pay that they are owed.
The report also reveals that the contractor went under after its trade credit rating went into decline.
According to the report, after being buffeted by Covid, Brexit and the effects of the war in Ukraine, the “company faced a new hurdle in 2023 as credit ratings started to decline, placing strain on its cash reserves, [and] insurers drastically reduced its credit ratings in August 2023.
“Some instances forced the business to operate on pro-forma invoices, posing a significant challenge for a business with a £250m turnover.”
Throughout the summer it sought a cash injection to stay afloat but its attempts – including getting an initial agreement over a £15m loan – fell through.
A lender decided not to proceed with the deal, “citing concerns about timing disparities between applications, certification, invoicing, and recent administrations of large construction companies”, the report says.
Administration was determined to be the best way forward at an emergency board meeting on 28 September, with it coming into effect on 2 October.
“This decision marked a sombre day for the directors and employees, many of whom had been with the company for most of their careers,” the report states.
The contractor, which also had offices in London and Essex, worked on major projects including the Paddington Cube, British Museum extension, 8 Bishopsgate Tower and Battersea Power Station.
It was the UK’s seventh largest M&E contractor as calculated in the CN Specialists Index 2022. Had it continued to trade with a £250m turnover, it would have risen to fifth in 2023.