Claims Direct, the troubled U.K. personal injury compensation settlement company, opted to go into voluntary administration (a procedure similar to a Chapter 11 filing in the U.S.), after failing to raise enough additional capital to keep operating. It also asked that its shares be suspended from trading.
The company has been having increasingly serious financial problems since a BBC report in October 2000 interviewed a number of dissatisfied ex-clients and revealed that it charged excessive fees, mainly in the form of compulsory insurance, for its services. The charges caused a dramatic drop in new cases submitted to the company for settlement, and its been having serious cash flow problems ever since.
At one time, shortly after it went public, the company had a market value in excess of $450 million, but it’s now estimated to be worth less than $10 million.
It’s also undergone several changes of management, and restructuring initiatives in an effort to recover, but apparently without success. Current projections showed that Claims Direct would continue to operate at a loss, triggering the decision to go into voluntary administration.
According to a report from Reuters News Agency, CEO Ronnie Henderson stated that “We believe that the appointment of an administrator will allow the company time to effect a restructuring for the overall benefit of creditors, employees and shareholders, thus enabling the company to move forward for the benefit of all.”