Stenoak subsidiary sunk by group chiefs

by John Leitch

Creditors of a Stenoak subsidiary that went into voluntary liquidation last week as a result of the burden of cross-company guarantees have put the blame for the collapse on Stenoak's main board directors.

Wells (Trinidad Lake Asphalt) had an annual turnover of around £1m and made a regular operating profit of £72,000 in 2000, £34,000 last year and £44,000 in the first six months of 2002.

Unbeknown to Wells' general manager, Stenoak directors had used the strength of Wells' income stream to raise finance in order to shore up other companies in the Stenoak group, and when one of these cross-company guarantees, for £940,000, was called in by the Bank of Scotland on 8 July, Wells simply collapsed.

Documents produced at the creditors' meeting showed that Wells was carrying a further £2.8m of cross-company guarantees, all with the Bank of Scotland.

When the rest of Stenoak went into receivership in early July, Wells continued trading as it was cash rich, having a £700,000 cash balance prior to the removal of the £940,000 to pay the BoS. Wells had two directors: Peter Jones and Steve Wyeth, finance director of the Stenoak group. Jones was seen as having little more than a nominal role.

There was doubt at the creditors meeting as to whether Wyeth and Jones knew that Wells' bank account had been emptied, as they believed policy decisions were being orchestrated by individuals on the Stenoak main board.

Wells' employees were not allowed to pay the company's bills. Wyeth was quizzed as to whether or not he signed Wells' cheques and is reported to have replied: "I believe that on the computer system I might have been a signatory."

"Wyeth said he sent in monthly reports, but didn't know what was going on," one of those at the meeting reported. "He said that the monthly report was the limit of his management responsibility."

l A deal has been struck between Trinidad Lake Asphalt and Asphalt Associates to ensure the continuity of supply of the high grade asphalt to UK specifiers. The new company is headed by Adrian Blacker.