CargoLogicAir - Case Update

David Buchler and Jo Milner of Buchler Phillips, the joint administrators of CargoLogicAir, have provided updates on what continues to be a complex and unique administration.

When we last wrote about this matter, Microsoft had confirmed that it had deleted all company records before the commencement of the administration, and the administrators were exploring potential claims against Microsoft should they be unable to recover certain assets as a result of the missing records. Microsoft has now confirmed that it has no back-up for this data, meaning it is permanently lost. As a result, A&O Shearman, who were instructed by the administrators to assist with this issue, sent a Letter Before Action to Microsoft for the losses suffered by the company for being unable to realise part of the assets because of the lack of records. The losses are substantial and include the debtors and deposits not recovered (the company’s records show 34 unconnected debtors with a value of approximately £1.9 million), in addition to a terminal loss relief claim worth an estimated £3.3 million.

The administrators have also provided an update on the company’s sanctions status. In their previous report, the administrators revealed that Cargo Logic Holding Limited, the company’s parent, had been dissolved by way of compulsory strike off, and the administrators were in the process of getting legal advice on whether this meant that CargoLogicAir was no longer subject to sanctions. In June, OFSI provided confirmation to DLA Piper that it agreed with the assessment that the company was not at present subject to an asset freeze. An opinion from counsel was obtained that agreed with this assessment. Therefore, the company is no longer subject to UK sanctions. However, it is still unlikely that debts owing by connected debtors (estimated at £6.3 million) will be collected due to the sanctions regime.

The administrators are also continuing to work with their agents Lambert Smith Hampton to realise remaining stock, but have advised that further realisations are unlikely due to the limited amount of stock leftover and storage costs.

With respect to distributions to to creditors, preferential and secondary preferential creditors will be paid in full and unsecured creditors are expected to receive a dividend other than from the Prescribed Part. As a result, DLA Piper have prepared an application to distribute to unsecured creditors in the administration. The application requests the Court’s directions on how to deal with distributions to sanctioned creditors. The timing and quantum of the distribution is unknown.

The joint administrators’ latest report can be accessed HERE. They are assisted by DLA Piper, A&O Shearman and Lambert Smith Hampton.