Manchester firm Cobbetts is set to enter administration and is looking for buyers after filing a notice to appoint administrators on Monday.
The firm, which has 242 lawyers and more than 551 staff, informed its employees of the news this morning, according to The Business Desk, which broke the news.
In a statement, a spokesperson for the firm said: “Having regard to the difficult trading conditions in the professional services sector we’ve reluctantly concluded that the appropriate course at this time is for the firm to obtain the protection of an interim statutory moratorium to enable a sale of the business and assets of the firm to be concluded in a short time frame.
“We’re also working closely with our regulator, the SRA, with all stakeholders and our professional advisers to achieve the best outcome for creditors, clients, employees and members. We remain confident that we’ll be able to provide a further positive update in the very near future.”
Cobbetts turnover was £45.4m in 2011/12, up from £44.5 in 2010/11, while average profit per equity partner was £323,000. In May 2012, the firm elected litigation head Nick Carr to replace Michael Shaw as managing partner. Shaw had been in the role for 16 years.
The firm had also come close to merging with DWF, but talks broke down in January 2012 with both parties citing uncertain market conditions (31 January 2012).
In December 2012, the firm released its figures for the six months to November 2012, when it said that turnover was more than £20m, in line with the previous year.
At the time, Carr said in a statement: “We’re pleased with our results, operating in what continues to be a challenging economic environment. As forecast, there’s been no real growth in the UK legal market over the last six months. Considering the prevailing market conditions, we set and met a prudent but still challenging budget, forecasting fee generation in line with the market and seeking to align expenditure to anticipated income.
“Our half-year results ensure we remain on target, and new client wins mean that trading predictions for the next six months are strong. We expect to meet our financial targets by year-end.”
Cobbetts is the first major UK law firm to file for administration since fellow Manchester firm Halliwells collapsed in 2010 (25 June 2010). In March 2012 another, smaller Manchester firm, Donns, filed for administration with Irwin Mitchell among the number to pick up its work in progress (23 March 2012).
Cobbetts’ LLP accounts for the 2010/11 financial year, filed last January, show that the firm refinanced with its lenders, Lloyds Banking Group, during the year and had a total of £7.5m in loans in addition to a £2.5m overdraft facility, all due for renewal on 29 June 2012. The facilities comprised a £1m revolving loan, a three-year £3.25m revolving loan and a three-year £3.25m term loan.
At the time the accounts were filed, the firm had not sought written commitments from the bank that the overdraft facility would be renewed. It had, however, held discussions with lenders about its future borrowing needs and had received no information suggesting that the loans could not be renewed under “acceptable” terms, the accounts state. The accounts were drawn up on a going-concern basis despite this.
The 2010/11 LLPs also revealed a £400,000 payout for the firm’s top earner, a 37 per cent increase on £292,500 for the recipient of the biggest profit share in 2009/10.
Cobbetts’ next LLP accounts were due tomorrow (31 January), nine calendar months after the firm’s 30 April year-end.
On 22 January the firm filed a document at Companies House detailing a change in its agreement with Lloyds, signed off by Leeds law firm Walker Morris. It reveals a debenture securing lender Lloyds TSB against all outstanding and future debts, filed just eight days before the firm announced it would appoint administrators.
The filing also gave the bank the power to appoint an “administrator and/or receiver”.
For details on the firm’s path to administration, click here.