Cooklin: Insolvency market fully rehabilitated
Business is booming at listed insolvency litigation funder Manolete on the back of the highest level of UK insolvencies for 30 years, it has told investors.
It has a record 418 live cases on its books (up from 351 a year earlier) and said that, with an 18-strong in-house legal team, it had the capacity to run 550 cases. It received 731 new case enquiries in the last year.
Manolete generally buys cases, rather than funding administrators to bring them.
A trading update for the year ending 31 March 2024 said it invested in a record 311 new cases, 18% higher than the previous year’s record, with cases becoming larger too.
While Manolete signed only nine cases where the headline value was over £1m in the first half of year – which it attributed to the small company insolvencies that “dominated” the market as Covid-19 ended and the government financial support for UK companies was withdrawn – in the second half, it took on 20 such cases.
The number of completed cases in the year, 251, was also a record, representing an aggregate of £24m in legally binding settlements, together with “a small number of favourable judgments”.
A pilot project with Barclays Bank to recover Covid Bounce Back Loans (BBL) that appear to have been misappropriated by company directors “has continued to perform exceptionally well”.
By the end of March, Manolete had completed 35 of the 83 cases assigned to it, generating over £1.1m of aggregate settlements, much of which has already been received in cash.
“This compares very favourably against other test pilot recovery programmes (using traditional debt collection agencies) that have been tried by various banks, where we are informed recoveries were less than 1%. Manolete has already achieved 63% on Barclays BBL case completions to date.”
The announcement said it was having discussions with the government, British Business Bank, the Insolvency Service and various banks “to potentially expand this line of business, by identifying the means to optimise taxpayer recoveries from the £51bn BBL scheme”.
It explained: “The government has already paid various banks over £8bn under its 100% loan guarantee for BBLs that have defaulted. Over £1bn of the £8bn is classed by the government as ‘fraudulent’.”
In all, Manolete expects to report a 26% increase in revenues to £26m and profit before tax of around £2.5m, compared to a loss of £3.1m last year.
Chief executive Steven Cooklin said: “During FY24, the UK insolvency market showed it was fully rehabilitated from the temporary two-year suppression of insolvencies that the government had enacted during the Covid-19 pandemic.
“Significantly higher prevalent interest rates, heightened concerns over geo-political conflicts in Eastern Europe and the Middle East and the withdrawal of the largescale financial supports provided by the government to UK businesses during the Covid-19 period, has resulted in the highest level of UK insolvencies for 30 years.
“Insolvency Service statistics from January 2024 show the number of creditor voluntary liquidations, the largest constituent part of the UK insolvency market, in 2023 was at its highest level since 1960.”
These factors led to “a substantial and sustained rebound” in the number of Manolete’s case enquiries and new case investments and returning the insolvency market to how it looked before the pandemic.
He added: “An agreed amended financing package with HSBC [its revolving credit facility is now £17.5m] and the robust organic cash generative nature of the Manolete business, provides a strong and efficient financing platform for the business to take advantage of these attractive market conditions.”
Despite the improving position, Manolete’s share price has continued falling. It ended 2023 39% down from the start at 155p, and fell as low as 110p in March. They current stand at 134p.
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