Low-profile stick-up artist

By Ian Fraser

The Herald

March 5th, 2007

Quiet man of corporate recovery speaks up about his craft – and fondness for banks

IAN Cuthbertson is a man who sticks up for banks – even when it looks like they are closing businesses and throwing workers on the scrapheap just because they’ve decided they want their money back, and they want it now.

Not surprising then, that he keeps a remarkably low profile, and never, until now, has given an interview.

Cuthbertson is a senior partner of Scotland’s largest law firm, Dundas & Wilson, and his specialism is insolvency and corporate restructuring. As it is the banks that generally pay his fees, his role of apologist might come as no surprise.

But for a quiet man, he is singularly vehement in insisting that his clients are not heartless money machines that will invariably trample on the interests of the small guy.

“The banks, when they look at these things, do look at the wider social impact”, says Cuthbertson, to whom falls the glory of saving the pensioners of engineering group Motherwell Bridge, when it hit the buffers in 2003.

Cuthbertson was the man behind the recovery of Motherwell Bridge, in which D&W acted for lenders Bank of Scotland, Royal Bank of Scotland and Rabobank. His plan attracted a barrowload of negative headlines at the time, with commentators suggesting the banks had hung staff – and particularly its pensioners – out to dry in a “pre-planned receivership”.

But he says: “The reality was that here was a large company which had diversified into six or seven different areas, and which was losing dramatic amounts of money. There was no way it could have continued in the direction it was going. It had a huge pension fund deficit which had become even more significant under FRS17.

“The bad bits of the company were going to die anyway, and you didn’t want the good bits to die with them, which is what would have happened if no action had been taken.

“What we did was create a newco (MB Engineering Solutions). The banks actually converted their debt into equity in the newco, and we also reached an agreement with the pension scheme where we said: “Right, this new venture can afford to pay £2.9m into the pension scheme and you, the pension scheme, can also take shares in the new company”. That was very innovative, it was the first time it had been done.”

He says the deal turned out to be beneficial to the pension scheme, which was in a position to benefit from the performance of “phoenix” company MB Engineering Solutions (since renamed Motherwell Bridge).

Last September the company was acquired by the private equity group JO Hambro Capital Management, which meant an additional £5m was injected into the pension fund. He also says the buy-out enabled the three banks concerned to recover the debt they had converted.

Cuthbertson carried out a similar deal at the North Sea oil services company Asco, which has since been acquired by Phoenix Equity Partners.

“What we did at Asco was to enter into the pension scheme an arrangement where they compromised the debt at a certain level, and took shares in the newco as well.”

Cuthbertson – who has secured a “gold star” from Chambers & Partners for his insolvency and corporate restructuring work in each of the past three years (and is the sole Scottish solicitor to have received such recognition in that period) – did his LLB at Glasgow University and trained at Boyds Solicitors before co-founding Dorman Jeffrey (now part of Dundas & Wilson) in 1979.

He has spent his entire working life doing insolvency and corporate recovery work. Today he runs the largest team of insolvency experts in any Scottish law firm, with some 16 fee earners doing nothing but corporate recovery work.

Five are London-based, with 11 in Scotland.

“We operate very much at a UK level. 70 per cent of what I do is English law work.”

He frequently works alongside Scotland’s other top practitioners, including KPMG’s Blair Nimmo, PwC’s Bruce Cartwright and Ernst & Young’s Tom Burton. He has been involved with the receiverships and restructurings of household names including HCI Hospital, Ramco, Melville Dundas, Clydesdale Electrical, What Everyone Wants, Texstyle World and McCowans.

Cuthbertson admits that pulling off such restructurings can require ruthlessness.

“There’s a certain point when (the management team who brought the business towards collapse) see reality and they know that’s it. You then say to them: what do you want to happen? Do you want to resist the change, so that the whole thing collapses (so there will be no jobs left) or do you want (to acknowledge defeat) so at least there will be some jobs left, so you’ve actually still got a legacy. When they see we’re here to help them, they often think “thank Christ, it’s your problem now.”

The exceptions however, are football clubs. Cuthbertson has been involved with Hampden (Queen’s Park), Hibernian, Airdrie, Livingston, Dundee and Morton.

Banks, he says, were all forced to be tougher to clubs after they embarked on a “crazy” spending spree in 2000-2001 in anticipation of broadcast revenues which never materialised.

He said: “The banks told the clubs we’ll continue to support you at the levels you’re at, but you actually have to run your own club in a slightly more business-like manner, for example by reducing wages-to-turnover ratio.

“But sanity seems to go out the window when people go through the gates of football clubs. Business acumen and reality do not exist. It’s a completely different world.”

Note: I regret to say that Ian Cuthertson died suddenly on 28 October 2009. He was 58 years old.  

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Posted by Ian Fraser on Mar 5 2007. Filed under Article Library. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry