Meldex losses total £74m as administrators go in

Former AIM-listed Meldex International, previously known as BioProgress and based on Cambridge Science Park, has gone into administration with losses of £74m.

The administrators are working with the directors to sell the firm’s main trading subsidiary, BioProgress Technology, as a going concern and its business is unaffected.

Chris McKay, of administrators McTear Williams & Wood, said: “The company’s recent past has not been pretty. Its last reported accounts showed losses of £74m, caused largely by write-offs of bad investments made by the previous directors.”

Meldex floated on AIM in 2003 with a market capitalisation of £16m and reached a high of £150m to become the darling of the AIM market. In 2005 the shares were the most traded on AIM. However, after a series of disastrous investments a new management team (including the return of Barry Muncaster) was bought in January 2009 to try and turn the company’s fortunes around. Having spent a few months restructuring the business, new funds were introduced from existing shareholders and creditors in September 2009.

Mr Muncaster said: “What we found on our arrival was quite a shock. The actions of the previous directors left the company little choice but to pursue them through the courts.” This proved to be a highly costly action. Recently, previously unknown liabilities have resulted in the company no longer being able to meet its debts.

For those who put new money into the company last year under a fresh issue of loan notes, there is some hope. The money advanced was secured over the assets of the company and any sale of the subsidiary should result in funds being returned to the loan note holders.

Mr McKay said: “There is a lesson here for all investors. If you need to put new money into a business to keep it afloat, try to secure the debt against some assets. It won’t guarantee that you will get your money back but it certainly moves you up the creditors list.”

Any interested parties or investors should contact the joint administrators immediately, he said.

Meldex, via BioProgress Technology, is involved in developing non-gelatin edible films for the pharmaceutical, healthcare and recreational industries – in other words, pill-coatings for vegetarians.

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