Administrators Danny Dartnaill, Neville Side and James Stephen from BDO were appointed to City A.M. on 26 July.
Their administrators’ proposal details how the business newspaper's attempts to recover from the impact of the Covid-19 pandemic were stymied by rising costs – including a circa 40% increase in the cost of printing and distribution.
For the year to 31 December 2022, management accounts showed sales of £6.1m and a pre-tax loss of £584,000 compared with a small profit the prior year.
Pre-pandemic results for calendar year 2019 were sales of £7.6m and a pre-tax profit of £218,000.
At the beginning of this year the shareholders were in talks with a new investor who was expected to inject fresh funding for a 25% stake in the business.
However, by May negotiations had broken down and an accelerated sales process began, with a deadline of 14 July as City A.M. would not be able to operate within its banking facilities for much longer after that date.
THG made its £1.5m offer to purchase the business and assets, excluding liabilities, on the deadline date.
“Management was aware that the company had insufficient cash available to settle salaries and critical suppliers before the July month end and therefore it was not possible to rescue the company and an insolvency process was both inevitable and imminent,” the administrators stated.
Because of the critical timeline and the risk of losing key staff, THG also agreed to fund the payment of salaries, excluding City A.M.’s directors, to the tune of £92,542. THG has become an unsecured creditor for that amount as a result.
It acquired the City A.M. business and assets via THG Newco 1 Ltd on 26 July.
City A.M.’s 38 employees were transferred via TUPE.
THG was formerly known as The Hut Group and the e-commerce giant had sales of nearly £2.4bn last year.
Floating charge holder SME Invoice Finance, owed £328,147, is likely to be repaid in full. The other secured creditor, Metro Bank, is likely to receive between 44p-75p in the £. Metro is owed £753,383.
HMRC was owed £192,460 in VAT and £484,693 as secondary preferential creditor and is also likely to be paid in full. HMRC is also listed as a general company creditor for an amount of £960,098.
Unsecured creditors of City A.M. (now renamed Cam Realisations 2023 for the purposes of the administration) are owed £2,047,011 and are likely to receive a small dividend of 5p in the £ via the so-called ‘prescribed part’ reserved for unsecured creditors, estimated to be between £104,000-£105,000.
City A.M. printer Iliffe Print was owed £75,293 while magazine and newspaper distribution firm NewsTeam Group was due £102,000.
Shareholders Nashco (owned by City A.M. co-founders Lawon Muncaster and Jens Torpe) and Netherlands-based The Blue Investments had called up share capital of nearly £9m, with an estimated deficiency of the same amount.
City A.M. had negative shareholders' funds of £1.6m in its most recent accounts.
THG founder and CEO Matthew Moulding previously said that while THG was mostly interested in building ad tech reach via the purchase, “it has to be a good thing that one of the UK’s most influential business papers remains in UK ownership”.
