Parents out-of-pocket after firm crashes
EXCLUSIVEBy Ted JeoryFURIOUS parents who were left out-of-pocket after a school bus company went into liquidation have been told they are unlikely to get their money back.
By Ted Jeory
FURIOUS parents who were left out-of-pocket after a school bus company went into liquidation have been told they are unlikely to get their money back.
More than 2,000 parents were affected after Maldon-based Phoenix Student Travel Ltd went into liquidation in October when its banker refused to increase its overdraft limit without further security.
They had paid out £240,000 for pre-paid tickets for their children's transport to a number of schools – including Colchester Royal Grammar School, Colchester County High School for Girls, King Edward VI Grammar School in Chelmsford and Chelmsford County High School for Girls.
But in a letter to the parents, Andrew McTear, of Ipswich-based insolvency practitioners, McTear, Williams and Wood, said as unsecured creditors, they were unlikely to recoup a penny after all assets were sold.
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Heather Toner, mother of 11-year-old Madeline, who travels from Danbury to Chelmsford County High School for Girls, said she and many other parents were livid about the situation.
"We were all sent bills in September to prepay for transport in the following spring term. I know some people forked out more than £1,000 to Phoenix up front and since it went into liquidation, we have now had to pay again to other operators," she said.
Robert Farrell, from Hatfield Peverel, set up Phoenix Student Travel Ltd in 2000, making himself and his wife, Susan, the sole directors.
After incorporating Phoenix Student Travel Ltd, he made a deal with First Buses under which he would essentially act as its ticket agent.
However, when the demand for tickets became so great, First Buses suggested he buy his own vehicles, although it would continue to operate them.
The liquidators said that arrangement had worked well initially and during the summer of 2001, Phoenix Student Travel Ltd took out a secured loan to buy 12 more buses at almost £18,000 apiece.
It also moved into a new depot in Maldon and employed 12 drivers, as well as a qualified transport manager to prepare for the expansion.
But the losses were piling up and by the end of July 2002, Phoenix Student Travel Ltd's losses had grown to £340,000 on an annual turnover of about £1.2million.
First Buses continued to carry half of Phoenix Student Travel Ltd's customers on pre-paid routes. Under an agreement, Phoenix Student Travel Ltd would charge parents and students in advance for the following term's travel with the bulk of that money to be handed over to First Buses as soon as it was received.
But in February this year, Phoenix Student Travel Ltd's accountants warned Mr Farrell he would have to put up fares for the autumn term by 30% to try to fund the mounting losses. Detailed calculations at the time suggested that could result in annual profits of £200,000.
However, when September came the actual student numbers were way off target, with many pupils finding cheaper fares elsewhere.
Phoenix Student Travel Ltd went into liquidation on October 16 after it became clear it would not be able to meet its debts and its bankers, Lloyds TSB, refused further financing.
It owed more than £1m, including almost £500,000 to First Buses, £240,000 to the parents who had bought pre-paid tickets and £200,000 to Mr Farrell.
As part of the liquidation process, experts have had to sell off the company's assets, which include 19 remaining buses.
That is expected to raise a net amount of £80,000, out of which £27,000 is needed to pay the company's 27 employees' wages because they are preferential creditors.
After estimated liquidation and legal costs of £35,000, only about £18,000 will be left to pay the non-preferential creditors, who are together owed almost £1.1m.
Mr Farrell refused to comment yesterday and Mr McTear could not be contacted for comment.