Administrators' bill for law firm revealed

The bill for handling the administration of a law firm has confirmed the costly nature of managing distressed businesses and offered some insight into why administrators are often keen to offload companies as soon as possible.

Cobbetts collapsed earlier this year after being hit hard by the ongoing impact of the credit crunch.

KPMG stepped in to handle the administration and a six-month progress report from the accountancy firm has now revealed that the work has so far incurred expenses of £1.7 million. These costs have been racked up between 6 February and 5 August this year and include hefty legal costs of £352,289, £169,367 of which was paid to Pinsent Masons for work done before KPMG was even appointed, Legal Week reported.

Other costs included work done by joint administrators Mark Firmin, Brian Green and Howard Smith. The blended hourly rate for the three came in at £328 and over the six months time costs have added up to £608,000.

In Cobbetts' case, a pre-pack administration was arranged and a takeover from DWF guaranteed £3.9 million for the assets of the company and the work it had in progress. Pre-packs have been heavily criticised of late given the fact that they often preclude finding the best deal for creditors, but the high costs that administrators are left to contend with often make them an inevitable course of action.

A report revealed in April that Cobbetts had total liabilities of more than £90 million before it collapsed. Lloyds Bank, one major secured creditor, is going to be missing out on much of what it is owed, recouping around £2.5 million of the £7.3 million it lent. It is unknown exactly how much will be recouped for other creditors once the pre-pack has been finalised and the company handed over to DWF.

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