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Operon's final days

04 February 2010

A statement of events leading up the Operon administration has been issued by Operon’s Group Managing Director, Martin Corbett.

“In Sept 2006 the majority shareholding in Operon (a Leeds based Facilities Management Company operating in the UK and Ireland with a turnover of over £50m and 950 staff) was purchased by an Icelandic company Nysir using loan money from Landsbanki. Nysir exposed Operon  to riskier contracts, one of which was a £27m contracting project on the Aberdeen Schools PFI project with Pihl – a Danish main contractor.
“With the Icelandic crisis in October 2008, Landsbanki stepped in to take control of Nysir in early 2009 and consequently of Operon. As part of this step in, Landsbanki also took control and ownership of NYOP(Aberdeen) and consequently the Aberdeen Schools PFI project. Landsbanki, therefore, owned both the majority shareholding in Operon and the Aberdeen Schools PFI scheme.
“Operon had inherent losses as a result of the £27m Aberdeen contracting project, however, an agreement was reached with Pihl and Landsbanki in July 2009 which gave financial certainty to Operon’s position on this scheme, which was assisted by a capital injection from Landsbanki to safeguard their ownership interests in the Aberdeen contract.
“Despite the July 2009 agreement, when the scheme was handed over in the latter months of 2009, Pihl withheld over £3m owed to Operon. An adjudication was subsequently awarded to Pihl for £475,000 of their £1.7m claim. Pihl failed to honour the adjudication and release the £3m withheld amounts to Operon. As a result enforcement was going through the Scottish Courts.
“This position was exacerbated by Landsbanki (via their subsidiary NYOP) reassuring Operon that they would pay directly for furniture Operon were supplying to Pihl to the value of £1.5m. Landsbanki failed to honour this, and additionally on their agreement to pay a £1.6m intercompany loan to Operon.
“The management team arranged for professional advisors to help review cashflow in late December 2009 as a result of the above. The advisors and Landsbanki recommended a meeting with RBS which was arranged for 22 January 2010 (this was a wrong decision in hindsight so close to payday).  RBS decided to freeze Operon’s account – five days before payroll despite the fact that Operon had over £1m in their current account. OPERON were not in default of their banking facility with RBS, the freeze was to safeguard £0.7m of loans and £1.4m of letters of credit, the latter being contingent liabilities.
“It appeared that RBS were not concerned in the fact that 950 people would be made redundant and would not be paid as a result of their actions and also they would cause disruption to schools, hospitals and government buildings as a result of them having no Facilities Management Contractor. Had it not been for the efforts of the management team and administrator to transfer these existing contracts to new contractors in less than a 5 day period, the consequences could have been disastrous.
“Local MP’s got involved, but once they found that a good proportion of the contracts were transferring to new contractors, this presumably this took the heat off them. Nevertheless over 250 staff were made redundant and not paid for their January salary as a result of RBS’s action and about 80 of these are from Leeds.
“People need to form their own opinions of RBS, Landsbanki and Pihl. The company had a very good underlying Facilities Management business which took over 15 years to establish, this was dismantled in less than 5 days as a result of their combined actions.
“The company went into administration on 29 January 2010. Ironically one of the Facilities Management Contracts which was left without a new contractor was the Aberdeen Schools PFI. It is worthy of note that the professional advisors were appointed as the administrators by RBS.


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