Bust Scottish law firm Pagan Osborne paid ‘exorbitant’ interest on loans
Directors at the failed Scottish law firm Pagan Osborne used short-term loans with “exorbitant” interest rates to help keep it afloat, according to administrators (Greig Cameron writes).
The firm, which traced its roots to 1826, fell into administration this month.
Additional details about the collapse have now emerged after FRP Advisory, the administrator, published documents at Companies House. The documents outline the financial difficulties the partners had been battling for several years.
A move to Edinburgh in 2009 proved to be ill-advised with the expected gains in revenue never materialising, which meant a struggle to cover the costs of an operation in the Scottish capital.
The Bank of Scotland wrote off £1.3 million of debt in 2013, but the firm then took a short-term loan of £1.2 million from an unnamed individual. Pagan Osborne’s residential lettings arm was eventually sold to raise funds to repay the loan.
The administrators said that as a result of “cash flow problems and in order to clear liabilities with HMRC and others the company took out a number of short-term loans from subprime lenders with what are now clear were exorbitant annual interest rates”.
FRP estimates that the firm will owe between £2 million and £2.5 million once all claims against it have accounted for.
Thorntons, another law firm, took on more than 120 staff as part of a deal to buy Pagan Osborne’s assets but about 70 of those are expected to be made redundant.
Other Scottish law firms to have gone into administration wince 2013 include Semple Fraser, Tods Murray and McClure Naismith.