Suppliers owed thousands after consortium decided not to inject more cash
Cyntra closure leaves creditors in the lurch
The councils and arm’s-length management organisations that owned procurement consortium Cyntra left suppliers and staff hundreds of thousands of pounds out of pocket when it folded last month.
Notes from a board meeting in May, seen by Inside Housing, reveal that the Cyntra board knew that the procurement company was on the brink of collapse and would ‘technically be insolvent and effectively trading illegally by the end of July’ if it continued trading without extra financial support.
The minutes set out a range of options, including taking the ‘zero cost’ option to ‘adopt the position of a shareholder and “walk away”’ from the consortium, meaning the owners would be ‘ignoring any ethical or moral responsibilities’.
Other options included injecting more cash, taking the company in-house or going through a ‘soft close’ which would allow existing contracts to expire.
The decision to close the company has left creditors owed up to £700,000, according to more than one source familiar with the situation.
Owner-members included Ascham Homes, Barnet Homes, Ealing Homes, Hammersmith & Fulham Council, Hillingdon Council, Hounslow Homes, Kensington and Chelsea Tenant Management Organisation and Sutton Housing Partnership.
Those owed money by Cyntra could hear how much they are likely to receive at a creditors’ meeting on 26 July. One creditor said it expected to receive no more than 40 per cent of what it is owed.
Organisations owed money include software company Nulogic, which is understood to be owed around £200,000, and construction management consultancy Procom, due around £90,000 for unpaid work. Cyntra is also understood to owe four employees around £90,000 in redundancy packages after staff were laid off at the end of June.
A number of creditors are understood to be taking advice over potential legal action to recover money owed.
‘We were dealing with a public sector-owned company and we would have expected to be treated in a more respectful action,’ said Nigel Barr, chief executive of asset management consultancy Stradia. Mr Barr confirmed that his organisation was one of those taking legal advice.
‘I am very surprised at the way Cyntra has gone about things,’ said another creditor. ‘Being backed by local authorities I thought we were relatively safe but it seems that isn’t the case.’
Cyntra’s owners declined to comment. Last week, they put out a joint statement confirming the closure of the company. It said: ‘The company has served us well but the ALMO landscape has changed and we now all face challenging times. As a consequence we have decided that the company no longer has a future in its current shape.’
A short history of Cyntra
- Cyntra was set up in 2004 by 10 London arm’s-length management organisations, of which eight are still members, with the intention of getting better value for money
- Members paid around £60,000 per year to take advantage of promised savings of more than 10 per cent for services such as repairs
- Last year, Cyntra established an £800 million framework attracting some of the biggest housing maintenance providers