Rok Plc, a building and social housing repairs firm, announced on Monday that it plans to go into administration. Under this procedure, the company avoids liquidation, but deals with its insolvency by handing operations over to an interim Chief Executive, or Administrator, who acts on behalf of creditors. Trading in its shares has also been suspended.
PricewaterhouseCoopers had been working with the company's banks ahead of loan refinancing talks. It is now being drafted in as the Administrator.
Connaught, a rival firm, went into administration earlier this year, with debts amounting to £215 million. It had said that it had been hit by unexpected cutbacks by several local authorities ahead of the Government's budget cuts.
Analyst Andy Brown, of Panmure Gordon, said that Rok's going into administration could well be "another sorry tale of poor management". The company had started looking into debt refinancing, with Royal bank of Scotland and HSBC as two of its main creditors. This was in spite of its £90 million revolving credit facility, which only expires in March 2012, and its significantly lighter loan burden compared to Connaught.
Bob Holt, the Chief Executive of Mears, another social housing repairs firm, said that the company would be prepared to absorb suitable contracts that are re-opened by Rok's administrators. Rok announced a £32 million contract with the Scottish Government last month.
Rok's shares last traded at 18.5p, giving the company a value of about £33 million.