Staff and firms owed £6m by Chartham Paper Mill near Canterbury ‘highly unlikely’ to get cash

A 284-year-old Kent firm went under owing more than £6 million to staff and businesses who face never being paid the cash they are due.

A total of 110 companies have been left out of pocket following the decision two months ago to put the firm operating Chartham Paper Mill nearby Canterbury into administration.

The firm running Chartham Paper Mill was plunged into administration in September
The firm running Chartham Paper Mill was plunged into administration in September

SCROLL DOWN FOR THE FULL LIST OF KENT COMPANIES OWED MORE THAN £1,000

Now, newly published accounts reveal the firms owed money – including several across the county – are expected not to receive a penny.

Despite this, administrator Interpath Advisory is set to pocket more than £381,000 – calculated at a staggering rate of £512 per hour – for its work since being appointed on September 22.

Accounts also show the historic mill’s employees – most of whom were made redundant when it went under – are collectively owed more than £5 million, while 17 companies across the county are owed more than £1,000 each.

Among them is Elite Power Transmissions in Bethersden, which has been left with an £18,500 hole in its coffers.

Speaking to KentOnlineowner Robert Banks said: “It’s a kick in the teeth. I don’t think we’ll get any of it back.

Robert Banks of Bethersden firm Elite Power Transmissions Ltd
Robert Banks of Bethersden firm Elite Power Transmissions Ltd

“If you take that much money out of any small business, it’s going to hurt – that’s a lot of money for us to write off.

“We’ll survive, but it’s something we’ll have to take on the chin.

“We’d been working with the mill for about five years, repairing a lot of the fans and supplying a lot of their electric motors. A lot of the guys there were thoroughly decent blokes.”

Rainham-based firm Mid-Kent Electrical Engineering is owed £14,100, while Ashford security company Sight & Sound stands to lose out on almost £14,900.

The administrator notes Canterbury City Council is due more than £30,700.

However, bosses from the authority say “the amount is what was owed on the business rates account at the time the documents were produced”.

Spokesman Rob Davies said: “Since then, the account has had an award from the Covid Additional Relief Fund, so the outstanding balance has come down to £4,206.

“We will continue to seek full recovery of the outstanding amount.”

Meanwhile, the mill has also failed to pay £138,000 to Npower, almost £7,000 to UK Power Networks and more than £1,900 to the Environment Agency.

A photograph from inside Chartham Paper Mill in 1972
A photograph from inside Chartham Paper Mill in 1972

In all, £382,000 is owed to three subsidiaries of Arjowiggins – which owns the historic mill as well as the company that runs it – in Scotland, China and France.

“Chartham was spending more and more money with us,” Mr Banks continued.

“But now we’ve got to find a way to fill that big hole.

“They’re not the first to go under, and I don’t think they’ll be the last – others will go as things get harder and harder.”

Huge losses

Accounts released at the beginning of this month by the administrator show Arjowiggins Chartham Mill Limited – which operates the site on the outskirts of Canterbury – started to encounter difficulties two years ago.

It stresses these were caused by “challenges faced by the global paper-making industry”, Covid and “rising energy costs and wood pulp prices”.

Staff at Chartham Paper Mill are said to have been in tears after receiving the news
Staff at Chartham Paper Mill are said to have been in tears after receiving the news

The company racked up pre-tax losses of £1 million, £3.35 million and £1.19 million in 2020, 2021 and the first nine months of this year respectively.

In a bid to address the issue, directors developed new product ranges, increased prices, reduced costs and secured additional funding, along with pandemic support from the government.

Bosses then launched an “accelerated sales process” at the beginning of this year. This attracted an offer to buy Arjowiggins’ UK subsidiaries.

“However, in mid-September 2022, the proposed purchaser significantly revised its offer downwards citing concerns regarding the wider economic outlook and the group’s financial performance,” joint administrator Alistair McAlinden writes.

“The revised terms were not considered acceptable.

“With the cost pressures continuing and a requirement for substantial funding which could not be met, the directors concluded there was no option but to place the group, including Arjowiggins Chartham Mill Limited, into administration.”

Paper-making operations ceased immediately following Interpath’s appointment.

Chartham Paper Mill pictured in August 1955
Chartham Paper Mill pictured in August 1955

At the time, the mill had trade debtors totaling £2.4 million, of which £600,000 has so far been recovered and used to repay lender Shawbrook Bank.

But 67 of the mill’s 91-strong workforce were made redundant on the day its demise was announced.

Mr McAlinden says the remainder were kept on to “assist with an accelerated sale process, wind down and mothball of operations”. Three more people have subsequently been made unemployed.

Administrators bill

Papers reveal almost £5.2 million is owed to staff as “unsecured creditors”. The figure consists of any salaries in excess of £800, coupled with pay in lieu of notice and expenses.

The seven-figure sum, along with the £1.03 million yet to be paid to scores of businesses, is “highly unlikely” to be returned, Mr McAlinden writes.

Former Chartham Paper Mill worker Nicholas Harrison
Former Chartham Paper Mill worker Nicholas Harrison

Separate claims from employees – labeled “ordinary preferential creditors” – for wage arrears up to £800 per member of staff, holiday pay and certain pension benefits are expected to total £75,000.

“Based on current estimates, it is unlikely there will be a dividend to ordinary preferential creditors,” Mr McAlinden adds.

“From the date of our appointment to October 21, we have incurred time costs of £381,482.75.

“These represent 744.5 hours at an average rate of £512.40 per hour.”

Mr McAlinden also says his firm incurred £14,000 in costs for work carried out prior to being appointed.

“How can the administrators warrant potentially being paid that much, especially when so many have lost their jobs?”

The administrator’s concession that staff probably will not receive a dividend for any of their claims has been met with anger by former mill employees.

Nicholas Harrison – who had to unpack his overalls and work boots from the locker he had been using for the previous 31 years in September – said: “It’s like someone’s taken away part of my life.

“I get up in the morning and think ‘what do I get up for now?’

“I’ve also got a friend from the mill who’s now wondering how he’s going to pay his mortgage.

“How can the administrators warrant potentially being paid that much, especially when so many have lost their jobs?”

Revival hopes

Mr Harrison, who worked as a machine assistant, woke up to an email two months ago informing employees they needed to attend a meeting at the mill.

Staff are said to have been – unknown to them – split into two groups; those who were being kept on and those who were set to be made redundant.

Chartham Paper Mill has been producing paper from its site near Canterbury for more than 250 years
Chartham Paper Mill has been producing paper from its site near Canterbury for more than 250 years

And once inside the site’s new office block, Mr Harrison, along with 66 others, were delivered the devastating news by senior members of Arjowiggins UK.

The 54-year-old – who remains unemployed – is receiving government redundancy payments.

“It was such a shock. One day I had a job and then all of a sudden we didn’t,” he added.

“We didn’t get any real warning. I’m not angry – I’m disappointed.

“I’m still hoping the mill will continue.”

In total, Arjowiggins Chartham Mill Limited owes more than £46 million to its various creditors.

Claims from the Financial Services Compensation Scheme and HMRC are currently estimated at £110,000 – but this, too, is “unlikely” to be paid back, according to Mr McAlinden.

A further £32.1 million is owed across the Arjowiggins group to lenders Shawbrook Bank, HUK 106 and Scottish Enterprise.

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Production at Chartham Mill dates back to 1738, and the site has more recently been known for making translucent paper.

Buyers wanted

Two years ago 80 jobs were saved at the site when a successful buyout was negotiated following insolvency proceedings against French parent company Arjowiggins and Sequana.

However, Interpath administrators Blair Nimmo and Mr McAlinden were appointed at 10 of the firm’s UK subsidiaries in September.

The joint administrators have made 368 of the group’s 463 UK employees – who were spread between Chartham and Scotland – redundant.

Interpath did not respond on the record when asked how it justifies potentially being paid more than £390,000. The fee is due to be approved by creditors or in court, as is typical in an administration process.

A spokeswoman did say, though, Interpath received no “credible” offers to buy the mill prior to its November 4 deadline.

“Regrettably, no offers have been received to acquire Chartham Mill as an operational site which are considered credible in terms of their value or the basis of the transaction,” she explained.

“The joint administrators remain open to discussions with any interested party who is in a position to put forward a credible offer.

“In the absence of credible offers to acquire the site as an operational facility, the joint administrators will continue to press forward with the site wind-down plan.

“Agents will be instructed to sell the assets, which include plant and machinery, land and buildings.”

Mr McAlinden says he considers “it prudent to retain all of the options available to us to bring the administration to a conclusion”, but he anticipates “the most likely exit route will be dissolution”.

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