What if the Auction House goes belly-up?

[computerworks]

Cal Metal sent this press release he received in for posting...

The message is how 'at risk' an auction sale can be if the funds are not escrowed...

Classic car auctioneer crashes with large debt
By Andrew English (Filed: 22/01/2004)

A subsidiary of one of London's oldest auction houses, Coys, which specialises in the sale of classic cars, has ceased trading with debts of 5 million pounds.

"We have applied for a CVA [Creditors' Voluntary Agreement] for one of our companies," said Coys' director Douglas Jamieson. "We are negotiating with our main financiers and with creditors, and have appointed a supervisor."

Ashok Bhardwaj of Middlesex, the company's nominee supervisor, said: "Coys of Kensington (Sales) Limited is insolvent and has ceased to trade. Our proposal went out last Friday for a creditors meeting on February 10. There are about 30 unsecured creditors, most of them private individuals and most of them in the UK."

Coys of Kensington last held an auction of more than 700 lots in the Royal Horticultural Halls on December 4. The majority of the 33 creditors are sellers whose cars were successfully sold at that auction but who have yet to receive a settlement, well past the 35 days stated in Coys' conditions of business for that auction. These include Peter de Savary and Lord Langford.

One creditor, who has not received a settlement cheque for his pre-war classic that sold on Dec 4, said: "I've lost the car, I've lost the money, everything. That was my pension. Why in hell's name was buyers' money not kept in an escrow account?"

Several creditors have questioned the further involvement of the Coys name in the Autosport auction sale in Solihull on January 10.

The company that held this sale, however, is Coys Limited, which was incorporated in January 2003 and is owned by people who are connected with Coys of Kensington.

Coys Limited recently bought out the tangible assets of that company and has continued to trade as an auctioneer of classic cars.

Ashok Bhardwaj confirmed the asset valuation was "more than a fair amount of their value". In explanation for the sale, the company's proposal to its creditors sent out on January 16 states: "The company sustained heavy losses against budgeted projected incomes.

"In order to ensure continuity of trading in the auction business, we decided that it was in the best interest of the creditors for all new business to be continued through Coys Limited to which would be sold all the assets of the company including the goodwill and which in future would continue the business formerly conducted by the company."

The creditors' proposal suggests the setting up of a scheme funded in part by Coys Limited, which will settle the creditors over three years with an estimated 23.98 pence in the pound. If creditors do not accept the proposal, the company will be forced into liquidation.

The proposal claims the debts have arisen because of a failed expansion plan in Europe and the US and a resistance to trade in the UK market.

It uses the name Coys of Kensington (Sales) Limited throughout but the company's name has been changed with effect from last Tuesday to Motoring Marketing Ltd.

While the Coys name was originally established in 1919, the classic car auction side of the business has swapped titles frequently in recent years.

Known since 1997 as Coys of Kensington (Sales) Limited, it was changed in December 2002 into Motoring Marketing Limited and again in January 2003 to Coys of Kensington Sales Limited, before the change two days ago back to Motoring Marketing Limited.

"Private creditors are just a handful out of 700 lots, that have been tied up because of our repayment schedule," said Jamieson. '
'We will be settling. We are giving our best endeavours to satisfy this to the best advantage of everyone . . . but it would be extremely damaging to the Coys name if this company failed."

"This isn't just bad for Coys," said one auctioneer competitor, "this is bad for all of us."