The failure to meet repayments on a £4m loan to its bank led to law firm Marsden Rawsthorn going into administration.
A creditors’ report by administrators, KPMG, showed Marsden Rawsthorn LLP owed £4.34m to its lender National Westminster, which it borrowed from through Royal Bank of Scotland.
In February, the company’s partners placed the LLP into administration and paid £1.24m to buy the assets of the business through a pre-pack insolvency.
The new company now trades as a limited company, Marsden Rawsthorn Solicitors.
In the report, administrators Paul Flint and Brian Green said the company had been “suffering serious cash flow problems due to difficult trading conditions” following the merger of Marsdens and Rawsthorns solicitors in 2007.
It added: “The LLP alleges that the cash position was further compounded by debt servicing requirements in relation to debt financing received from the bank.
“This was in the form of a number of loans provided between 2007 and 2009 and since mid-2012, the LLP has been in dialogue with Royal Bank of Scotland regarding a solvent restructure of the LLP’s indebtedness.”
It added that “despite extensive dialogue” the firm failed to reach a deal with the bank leading to KPMG being called in during late 2012.
KPMG has tried to sell the business with 11 parties being identified and talks were held with regional and national law firms.
The report added: “Nine of (these) following initial dialogue requested a company of (details of the LLP).
“None of the parties identified were however willing to submit an initial offer for the business in its entirety.”
Having failed to secure a sale and ruled out the idea of selling off its profitable corporate and commercial divisions, the administrators agreed a £1.24m pre-pack deal with the LLP’s partners.
The new company has already pay £20,000 of the agreed deal with the rest paid in instalments over the next year.
KPMG has agreed a deal with the new company, Marsden Rawsthorn Solicitors, for its head office at Faraday Court in Fulwood, Preston, but the new company has released its office St Thomas’s Road, Chorley and a storage facility on Lune Street, Preston.
Last week, the law firm confirmed it had moved out of St Thomas’s Road into new offices on Matrix Park at Buckshaw Village, near Leyland.
The new company is led by chief executive, Debbie Pettitt.