The Tribune

• Liquidator defends ‘relatively positive outcome’

• Two-thirds from Taylor/Mabon $150k donation

• Exposes ‘harsh economic reality’ for creditors

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Forty-one former staff of now-defunct Taylor Industries will receive just 33 percent of the total termination pay and benefits owed to them in what the company’s liquidator defended as “a relatively positive outcome”.

Tribune Business understands that payments worth a collective $225,000 will be made to ex-employees of the insolvent electrical retailer and contractor next week, representing just one-third of the total $685,000 due when the Shirley Street-based company collapsed and closed just over three years ago in January 2019. 

Andrew Davies, the Crowe Bahamas accountant, in his fourth and final report to the Supreme Court, detailed several barriers to generating a greater recovery for Taylor Industries’ preferred creditors - the Government and the staff. Besides “the relatively low value” of the company’s remaining assets and unfavourable economic conditions created by COVID-19, he also cited the “significant costs” associated with court-supervised liquidations.

Asserting that the liquidation had been run “efficiently and cost effectively”, Mr Davies asserted that “the harsh economic reality” for creditors of insolvent companies was that only those with security - namely the banks and other major lenders - gained what he described as “a return” from formal winding-ups.

“The liquidator is satisfied at the overall outcome of the liquidation process given the nature and relatively low value of the assets the company owned, and the difficulties of finding qualifying buyers in a small market with economic conditions unfavourable for the retail industry,” Mr Davies wrote in his Supreme Court report.

“The challenge this created was running the liquidation efficiently and cost effectively, while maintaining the necessary levels of independence to ensure asset sales were widely advertised and all realisations were conducted on an arm’s-length basis with the necessary level of transparency the creditors and court reasonably expects.

“Additionally, the statutory requirements involved in running an insolvent liquidation under the Insolvency Act and the auspices of the court can lead to significant costs depending on the complexity of the liquidation and the level of legal advice the liquidator needs to properly carry out their duties,” Mr Davies added.

“In addition to direct guidance they receive from their appointed counsel, the liquidator has at times needed to apply to the court for specific direction and approval in matters relevant to the liquidation, which has added to the overall costs. These costs are unavoidable as they are a requirement when acting in the capacity of official liquidator.

“The harsh economic reality for many insolvent liquidations is that often only the secured creditors receive a return from the winding-up process. Companies that find themselves under serious economic stress will typically exhaust their asset base to stay afloat in order to buy time to try and restructure their affairs. In circumstances when these efforts are unsuccessful, and the company can no longer continue to trade, there can be relatively few assets left to meet the debts owed to unsecured creditors.”

Having explained how Taylor Industries’ liquidation reached the end-point, Mr Davies concluded: “In light of this, a dividend of 32.9 cents on the dollar for unsecured preferential creditors should be considered a relatively positive outcome.” Besides the former staff, the Government’s Department of Inland Revenue (DIR) is the only other creditor to recover anything from the Taylor Industries’ liquidation.

It will receive just over $6,034 of the $18,327 it was owed in unpaid VAT from Taylor Industries’ December 2018 filing. Kelly’s Home Centre, which was owed $11,895, and Florida-based Peninsula Electric Distribution’s, which claimed $134,750, will receive nothing due to their status as unsecured creditors.

The “33 cents on the dollar recovery” means that four long-serving Taylor Industries managerial staff, who were owed between $68,000 to just over $71,000, will enjoy recoveries of between $22,500-$23,500. However, more junior staff with few years’ service will receive as low as $356.

Calculations by Tribune Business show that the Government and Taylor Industries’ ex-staff would have received just 11. 6 percent, or $81,865, of the $704,157 collectively owed to them if the company’s former owners, the Taylor and Mabon families, had not contributed $150,000 to boost the liquidation estate to $231,865 - a payment they were under no obligation to make. These funds were received in November 2021.

This was acknowledged by Mr Davies in his report, where he attributed his ability to pay a dividend to preferred creditors to “receiving a contribution to the liquidation estate from the Taylor/Mabon family”. Other factors that enabled him to recover some of what was owed included collecting accounts receivables due to Taylor Industries via salary deductions from government workers, as well as finding “a single buyer” for the company’s remaining inventory.

The latter, Mr Davies said, had generated “a reasonable return” at the top-end of his expectations. Initially estimating that Taylor Industries’ remaining inventory was worth between $100,000-$125,000, he was able to sell it at the latter price.

The report to the Supreme Court, which has been obtained by Tribune Business, asserts that Mr Davies’ asset recovery efforts yielded returns above expectations. The sell-off of company vehicles raised $43,600 as opposed to the projected $40,000, while furniture and fixtures disposals yielded $15,800 as opposed to the forecast $5,000. Staff pension fund asset recoveries also exceeded forecast by $8,123, while accounts receivables collections totalled $72,793.

“The liquidator was fortunate these accounts receivables balances were collectable under binding salary deduction agreements that the various government payroll departments honoured,” Mr Davies informed the Supreme Court. “As of the date of this report there are no remaining payment obligations from these salary deductions.

“The liquidator has had to spend additional time dealing with these salary deductions whereby a government payroll department did not stop the payments after being sent the instruction to do so. The liquidator then had to refund these incorrectly received amounts. The refunds to the Government payroll department since the third interim report amounted to $1,290, which reduced total accounts receivables collections to $72,793.”

Mr Davies said there were no further accounts receivables balances to be realised. Any remaining sums were too small, and the costs of trying to collect would far outweigh any gains. The Crowe Bahamas accountant added that he was also unwilling to delay payment to former staff and the Government any longer while he waited for the Taylor/Mabon families to sell Taylor Industries’ former warehouse on Dunmore Lane.

This property, valued at around $200,000, was owned by a separate company, Rolyat Ltd, in which Taylor Industries itself held a 1.09 percent stake worth around $2,180. “In early 2022, the liquidator received a communication from the Taylor/Mabon family that they were expecting an offer for the warehouse and thus any proceeds from this potential sale may still be realised for the benefit of the liquidation estate,” Mr Davies said.

“The liquidator received no further communication that the sale of the warehouse would occur, and so by the middle of February the liquidator decided the optimum course of action was to finalise the liquidation by starting the process of declaring and paying the first and final dividend.” Any recovery from the warehouse sale, he added, would not be a material outcome for the liquidation.

A total $523,093 was recovered as receipts by Mr Davies in his capacity as liquidator, of which 28.7 percent represented the $150,000 injected by the Taylor and Mabon families. However, his work incurred some $258,395 in expenses, thus reducing the net recovery to $264,697 as at March 1, 2022.

The liquidator also took a near-$33,000 provision to cover remaining estimated expenses involved in winding-up Taylor Industries, thus reducing the final payout to just over $231,000. Of the $258,395 in total expenses to March 1, 2022, almost $218,000 - more than 84 percent - represented the combined fees charged by Mr Davies and his attorneys, Lennox Paton.

The fees charged by liquidators and attorneys in Supreme Court-supervised liquidations have become increasingly controversial and contested in recent years, with some creditors charging that they are milking the remaining assets at the expense of recoveries due to them.

However, liquidators and their counsel are acting as court officers, and all fee payments have to be approved by the Supreme Court and presiding judge who effectively acts as a ‘check’ on such costs. And, as Mr Davies pointed out, court-supervised liquidations can be expensive due to the need for legal advice and having to make applications to the court for guidance.