Will Norton Motorcycles Completely Cease To Exist?

[Basket Case]

We’ve known since the end of March, 2020, that Norton Motorcycles owes millions of pounds to its creditors. At long last, Norton administrator BDO filed its official “Statement of Administrator’s Proposal” report with the UK’s Companies House. That means any interested parties can now read the entire document for themselves. This report was filed on March 23, 2020, and made publicly available on April 7, 2020. 

Besides the amounts owed to secured, preferential, and unsecured creditors, here are the most important things we learned from this summary: 

• Norton’s own directors were already looking for a purchaser for the business as of November 2019, prior to the company formally going into administration in January 2020. Needless to say, the directors did not find a buyer.  
• 331 parties expressed interest in buying the business, of which 242 were trade and 89 were investors. All were of course required to sign NDAs, but only 169 actually returned those NDAs. In total, 29 formal offers to buy the business were received. Best and final offers were required to meet a deadline of March 25, 2020, but no further details are available at this time. Any results will be provided in the next Joint Administrators' report to creditors. 
• According to company records, there were 69 motorcycles in Norton’s possession or at third-party locations when the administrators came in. However, this accounting proved inaccurate, so BDO created its own breakdown. Here’s a screencap taken directly from the report: 

• A total of 466 customers previously paid deposits for new Norton motorcycles that they have not received, according to the company’s records. "These monies were not ring-fenced in a separate bank account and therefore no funds are available to return to impacted customers from this source,” reads the BDO report on this matter. These customers are considered as part of the “Unsecured Creditors” class. In terms of payout from any money available, it goes in order from Secured Creditors (which is Metro Bank, in this case) to Preferential Creditors (Employees), then to Unsecured Creditors and finally to Shareholders. As previously stated in the earlier summary, it is unlikely at this point in time that anyone other than Metro Bank will recoup any of their money. 
• The Norton Stripped Bikes debacle is also addressed. “At the date of the Joint Administrators' appointment, the Company held nine motorcycles on behalf of customers, in order to undertake necessary repairs which were covered under the previously provided warranty. A number of these motorcycles had been stripped of parts without the authority or knowledge of the owners and it has been alleged that this may potentially have been over and above what was necessary to undertake the agreed warranty repairs. Due to the Administration, the Company was unable to return these motorcycles to their original condition or undertake any repairs under warranty. The Joint Administrators continue to investigate the circumstances of these events and continue to liaise with any impacted parties." 

Here’s another bit I found particularly interesting, and which I’ll quote directly:  

“The Joint Administrators have a duty to investigate the affairs of the Company, to establish if there are any actions that can be pursued for the benefit of the creditors as a whole, and also to investigate the conduct of the director. In this latter respect, the Joint Administrators must submit a confidential report to the Secretary of State regarding the conduct of all directors and shadow directors during the three years before the administration." 

The report also mentions a forensic business team it has brought in to more fully investigate this matter, after which it says, “If creditors wish to bring to our attention any matters that merit investigation, they should contact the Joint Administrators c/o BDO LLP 5 Temple Square, Temple Street, Liverpool, L2 5RH quoting reference 00324560.”  

That text is toward the end of the report. However, before we get to the summary of the administrators’ proposals, I’d like to quote a bit from the very beginning of the report because it tells you exactly what to expect.  

Under the heading “Achieving the Purpose of the Administration,” it says: 

“The first objective is rescuing the Company as a going concern (i.e. restructuring the Company's business, resulting in the survival of the Company).  

Due to the extent of the Company's known liabilities (including sums owed to Holdings), it is not considered that the Company will be rescued as a going concern.” [Emphasis mine.] 

Now that we’ve hit the salient points of this report, it’s not difficult to see why BDO came to that conclusion, and why it now proposes either continuing administration of the company as it has done for the past two months, or else entering into Creditors’ Voluntary Liquidation or dissolution of the company.  

Where does that leave things? It’s only a matter of time before we know if any of those 29 offers made for Norton is accepted. If not, liquidation of assets or dissolution seems likely. Exactly how long we’ll need to wait to learn more isn’t clear. However, it’s worth noting that once the company went into administration, things have moved pretty quickly ever since. 

Source: UK Companies House 

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