This was followed by its collection arm Cheshire Recycling, which traded as AbitibiBowater Consolidated Europe, going into administration on Thursday 11 February.
The firm was subsequently purchased by German paper firm Palm Paper, which saw company staff and a large number of around 100 local authority collection contracts move to the newly-formed Palm Recycling.
The new company has emphasised that contracts will continue with local authorities and be uninterrupted. However, outstanding debts have stayed with the administrators Ernst and Young (see letsrecycle.com story) who yesterday told letsrecycle.com that some of those owed money could lose out.
A spokeswoman for the company said: “These will be unsecured claims of administrator. We have a duty to report to creditors around eight weeks after we are appointed. Creditors will all receive proposals which will outline what we think will happen in the future. That has to be filed through Companies House.”
“Unfortunately, there is always a prospect that there will be no material dividends.”
An accountant told letsrecycle.com that in cases such as this, priority is given to paying off banks, parent companies and mortgages. However, ‘unsecured claims', such as those for employees, merchants, subcontractors and the HMRC, then take a share of whatever is left in the pot after the priority claims have been dealt with.
Sale
The sale of Cheshire Recycling to Palm has caused concern for some councils and subcontractors.
One council recycling officer, who wished to remain anonymous, explained that a subcontractor under its paper collection contract was seeking repayment of sums due from Cheshire Recycling. The recycling officer added that it appeared that the council itself was owed money by the firm.
The recycling officer said: “They [Abitibi] have just sold on local authority contracts to Palm Paper and kept outstanding debts with the administrator, and we are having to go through the administrator to get that. We have rung [Abitibi] to get a comment but nothing. There has been very little comment.”
A waste management officer at another council explained that it was a “sensitive time” and that they expected there to be disruptions in the recycling payments caused by the sale.
Another cleansing officer, who wished to remain anonymous, told letsrecycle.com that he knew of a number of local authorities who would not be willing to move their collection arrangements over to the Palm Recycling service. He said, instead, they would be looking to negotiate with their subcontractors to find alternative arrangements.
“There is a lot of good will on the half of subcontractors out there who are carrying on the collections and I know of one which is owed around £2 million, while others have outstanding debts of £500,000 and £100,000. Despite this they are continuing to carry out the local authority collections,” he said.
Commenting on the situation, Ron Humphreys, former managing director of Cheshire Recycling and now with Palm Recycling, told letsrecycle.com: “The only comment that Palm can make is it acquired the assets and not the shares [of Cheshire Recycling]. The newly formed company is expecting to continue to deliver the service without interruption to the councils and the pressrooms.
“Obviously we will be working with the subcontractors who provide those services. And, it has offered confidential commercial terms to those subcontractors to help them over this transitional period.”
Smoothly
While merchants and subcontractors face an uncertain future, councils have reported that the transition to collections under the newly formed Palm Recycling have otherwise run smoothly.
North Warwickshire district council had its whole kerbside dry recycling collection service operated by a subcontractor on behalf of Abitibi and had just entered the fourth year of a five year deal before Cheshire Recycling went into administration.
Commenting on the transition, Bernard Woodhall, recycling and refuse manager at North Warwickshire, said: “At the moment it is all change but no change. The service is continuing as is through the same subcontractor and the overarching management seems to remain the same. We have meetings with Palm later this week to discuss where we go from here, as it were.”
In addition, Edinburgh city council explained that there had been no break in its collection service following the sale of Cheshire Recycling. A spokeswoman said: “As far as we are concerned it is going to have no impact.”
Rotherham metropolitan borough council also confirmed that there had been no disruption to its paper recycling collection service following the handover from Cheshire Recycling to Palm Recycling.
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