Drive Assist UK, once one of Britain’s leading non-fault accident vehicle replacement companies, and its two sister companies have collapsed owing more than £82 million.
The accident management specialist and its Millennium Motor Group and Sol Car Rentals businesses went into administration following the loss of a major contract and an inability to raise £10m to continue trading.
More than two months after administrators from Zolfo Cooper were appointed, the companies are now being wound down with thousands of cars being recovered and due to be sold. The collapse of the Tamworth-based company has also resulted in the loss of around 640 jobs.
Its downfall comes after it reported profits of £32.6 million in 2007, when it was ranked 25th in The Sunday Times Deloitte ‘Buyout Track 100’.
At the time, Drive Assist UK operated a fleet of more than 14,000 cars and vans and had a turnover of above £100m.
The business continued to expand, but for the 12 months to May 31, 2011, accounts reveal that Drive Assist Holdings, the parent company, reported a pre-tax loss of £233.4m on turnover of £107.2m, compared with a loss of £24.9m on a turnover of £157.2m for the previous 12 months.
Insurance company contract loss
TA Associates, a leading buyout and private equity firm, invested in Drive Assist in 2003, and four years later realised a return of more than triple its investment through the $500m (£322m) sale of its stake to Charterhouse Capital Partners, another buy-out specialist and private equity firm.
The creditors’ report highlights that last year Drive Assist lost a major contract from an unnamed insurance company, although it is reported to have been the Peterborough-based BGL Group, that had historically accounted for an average of 30% of the company’s annual revenues.
When the administrators were appointed Drive Assist operated a fleet of 7,458 vehicles, the vast majority of which were acquired on short-term purchase and buy-back agreements from manufacturers.
Most of the vehicles were funded by Lombard North Central, Fortis Lease UK and United Dominions Trust.
Millennium, which traded under the name Nottingham Autopark, was reliant on Drive Assist to provide vehicles, although it did acquire some from other sources via a separate stocking facility.
Meanwhile, Sol was engaged in the short-term rental of vehicles to either individual or corporate customers, with around 900 on hire for durations ranging typically from between six and nine months. When the company entered administration, 215 of the vehicles were being used as company cars by Drive Assist employees, with the remainder on hire to third parties.
In contravention of financing agreements
However, the creditors’ report says such lengthy hire periods appeared to be in direct contravention of financing agreements with funders, which prohibited hire periods of greater than 28 days. As a result, Deloitte was asked to perform a review of certain aspects of the businesses.
While that review was in progress, Zolfo Cooper was engaged by Drive Assist’s syndicate of banks to perform a contingency planning exercise, while the directors explored further funding options.
The creditors report said: “It became clear that the companies would not be able to continue to pay for the financing associated with its fleet and the associated operating costs.
“As a result, the vehicle funders made it clear that they would require the immediate return of all funded vehicles as quickly as possible to preserve the residual value of the fleet and minimise the loss suffered.”
The report highlights that by January 25, 4,797 vehicles had either been returned, or were in transit to the vehicle funders, with a further 1,060 available for collection either from Drive Assist’s 13 depots, which are being closed, or end-users.
Contracts terminated on all Sol cars
As a result of the breach of the hire agreement, the vehicle funders requested that the contracts be terminated on all cars operated by Sol and the vehicles recovered. The creditors’ report reveals that to date approximately 394 Sol vehicles have been returned to the vehicle funders.
The creditors’ report also reveals that prior to the administrators’ appointment, Drive Assist had received payments in relation to the sale of several hundred vehicles financed by the vehicle funders.
The report added: “All of these vehicles were subject to financing agreements with the vehicle funders and, as such, the proceeds of sale should have been paid directly into a separate designated account, charged to the vehicle funders.
“However, these funds were paid directly into Drive Assist’s main current account and some of the funds were subsequently used to provide additional working capital.
“The administrators, with the agreement of both the senior lenders and vehicle funders, took independent legal advice on this matter to determine how this should be dealt with. This legal advice is confidential but has been shared with the senior lenders and vehicle funders and discussions are in progress to resolve this matter.”