Cullum 'lost £17m' when his Towergate company collapsed

Pre-packaged adminstration deal thought to have cost insurance tycoon a personal fortune
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The Independent Online

Insurance tycoon Peter Cullum, the executive chairman of Towergate, is believed to have personally lost £17m in the pre-pack administration of his company's financial services arm earlier in the year.

And Patrick Snowball, the former finance director of insurer, Aviva, is thought to have lost £600,000 of his own cash when Towergate Financial Services collapsed in June.

Mr Snowball, who starts his new role as chief executive of the Australian insurer Suncorp this week, joined Towergate in 2007 after leaving Aviva.

The 20-year army veteran was tasked with buying up IFA businesses through the financial services arm, starting with an initial war chest of £100m in January 2008. He had hoped to buy as many as 20 firms but eventually bought 10. However, the advent of the credit crunch put paid to the consolidation strategy and any chances of a public listing of Towergate.

The board of Towergate Partnership placed the financial services arm into administration in June via the highly controversial pre-packaging process.

A pre-pack is the process of selling the assets of a company immediately after it has entered administration. Often the previous directors or management purchase the assets of the company from the administrator. In this instance, Towergate Underwriting Limited, owned by Towergate Partnership Limited, bought out the IFA firms previously held by Towergate Financial Services, from the administrator, Grant Thornton.

One disgruntled Towergate Financial Services creditor said: "We feel royally shafted. There is only one person who will come out of this well in the end and that's Peter Cullum."

But sources close to Mr Cullum have refuted suggestions of a stitch-up: "By buying back these IFA businesses, Peter is taking a risk. There is no certainty he will get his money back in the longer term. The pre-package process in this instance saved more than 200 jobs."

At the height of the bull market, the Sunday Times Rich List estimated that Mr Cullum was worth £1.7bn, although his fortune is now thought to be much less.

Estimates in 2007 suggested that Towergate was worth as much as £3bn as the company pursued a path toward a public listing. However, it got into difficulty in the autumn of 2008 when the insurer was forced to renegotiate its banking covenants.

Towergate made £112.4m earnings before interest, taxes, depreciation, and amortisation during 2008, according to the firm's recently released accounts.

The American hedge funds Och-Ziff and Reservoir Capital enjoy stakes in the company, collectively worth more than £200m.

Patrick Snowball was unavailable for comment and a spokesman for Towergate declined to comment.

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