The unsecured creditors of Longtown Mart and its sister site in Dumfries will not receive any of the money owed to them, administrators say.

Cumberland and Dumfriesshire Farmers Mart went into administration in August, only to be sold immediately in a pre-pack deal to a new company, C&D Auction Marts, and to property company Thomson Roddick & Laurie.

This enabled the marts to continue trading and preserved 70 jobs.

A report from joint administrators Russell Cash and Ben Woolrych, of FRP Advisory, reveals for the first time the amount the buyers paid – £1.636m.

This figure includes a contribution of £746,200 to ensure that farming creditors of the failed business were paid in full.

The report says: “As part of the transaction, it was recognised that should farmers not be paid for livestock previously bought to auction and sold by the company, it was likely they would cease to do so going forward, significantly reducing volumes and the viability of the business.”

Barclays Bank, which was owed £3.9m and had a charge over the company’s assets, agreed to forego approximately £1m so that farming creditors could receive the full £1.75m owed to them.

However, unsecured trade creditors – owed £646,000 – and HM Revenue and Customs, owed £111,000, are unlikely to receive anything.

At the time that Cumberland and Dumfriesshire Farmers Mart went into administration, it was itself owed £5.963m by debtors.

The administrators’ report says: “The ledger had a significant amount of bad and doubtful debts. After applying a specific provision for these debtors and a further general provision, together totalling £4.175m, the book debt ledger was estimated to realise £1.788m.”

It adds: “The company’s business model, receiving a commission of approximately four per cent on sales through the auction mart, whilst taking on the risk of collecting debtors, means that it is particularly vulnerable to bad debts, which have a disproportionate impact on cash flow and results.”

The company’s final set of accounts gave no indication that it was on the brink of insolvency.

They showed a pre-tax profit of £301,694 and a balance sheet with shareholders’ funds of £2.44m.

The first clue as to what was ahead came in July with the collapse of the Lancaster Meat Company, which owed money to all six of Cumbria’s auction mart operators.

Then at the beginning of August, Cumberland and Dumfriesshire announced an investigation into “financial irregularities” and the suspension of Malcolm Bendle, its operations/HR director and company secretary.

The administrators’ report says: “The business has suffered losses and cash-flow pressures... as a result of poor debtor collection processes and bad debts incurred.

“The company subsequently uncovered evidence that it had been the victim of a material fraud in July 2015, which significantly worsened the financial position.

“The joint administrators are investigating this as a priority, to ascertain the circumstances and quantum of the fraud, as well as giving consideration to potential avenues of recovery to benefit the company’s creditors.”

The Cumberland News revealed earlier this month how close the business came to closure.

It was saved at the eleventh hour following intervention by Penrith and the Border MP Rory Stewart and Farming Minister George Eustice.

In its new incarnation, the main shareholders are the Thomson family – of Thomson Roddick & Laurie – who were substantial shareholders in the old company, and the Longtown-based livestock haulier Wm Armstrong. Longtown Mart was founded in 1926 and is Europe’s largest sheep mart.