A cyber attack that took down Caledonian Modular’s servers and encrypted its data hampered negotiations to provide extra funding for the struggling business.
Caledonian Modular fell into administration in March. But cyber attackers caused havoc in its computer systems in February, while negotiations to meet the company’s extra funding requirements were still ongoing.
That’s according to a report by administrators Alvarez & Marsal (A&M), who were called in on 8 December 2021 to conduct a review of the loss-making business.
A&M blamed quality issues on legacy contracts which required remediation, as well as rising costs and supply chain delays amid the covid-19 pandemic, for Caledonian’s woes.
Contingency planning
By December last year, Caledonian owed £25m worth of debt to New York-based hedge fund manager and majority owner MAK Capital.
A&M started to make contingency planning for an insolvency in January this year. It also started looking for solutions to Caledonian’s funding requirements, including funding discussions with MAK and a request to clients to improve contract cash flows and pricing. However, customers declined further funding because of uncertainty over Caledonian’s ability to deliver the remaining modules.
Creditor pressure
As a result of creditor pressure, the business filed a notice of intention to appoint administrators on 23 February. But the next day, on 24 February, it suffered a cyber attack which infected its servers and encrypted its data. A&M said this reduced Caledonian’s operating capacity, and would have required cost to remedy. It also restricted the information that could be provided to third parties as part of funding negotiations.
Caledonian appointed A&M as administrators on 8 March. It made 23 of 227 employees redundant shortly afterwards.
Sale to JRL
It sold the business to JRL for £6.25m on 31 March. A&M said: “We are satisfied that the offer represented the best available return to creditors considering the restrictions posed by the cyber attack, significant ongoing losses, and timescale available… It offers a level of return to creditors comfortably in excess of the alternative of a break-up while also preserving significant ongoing employment in Newark.”
Caledonian’s collapse left it owing £20.7m to unsecured creditors. That included £12.5m to trade creditors, another £7.8m in contingent or other liabilities, and £388,500 to employees and former employees.
Caledonian Modular began as the Caledonian Mining Company in 1964. It manufactured and supplied underground roadway support arches as well as performing as a mining and civil engineering contractor. In 1997, it changed its name to Caledonian Building Systems, manufacturing and selling modular and cellular accommodation. In 2013, it changed its name again to Caledonian Modular.
