A CONSTRUCTION firm which owes more than £6.7million has entered into insolvency proceedings.

Phelan Construction, based in Brunel Road on the Gorse Lane Industrial Estate, Clacton, confirmed it has entered into a Company Voluntary Arrangement (CVA) with its creditors and will continue to trade as normal.

Papers have been filed with Companies House showing the firm owes a total of more than £6.78 million to 140 firms.

Phelan Construction is the main contractor on the £9.7 million redevelopment of Colchester’s Mercury Theatre.

Neil Coy, managing director, said: “The short-term aim of the business will be to minimise its overheads, which will in turn see the business engaged in a smaller number of jobs so it can stabilise its finances and return to a position of growth.

“The company has built up a solid reputation over the years and works on six and seven figure contracts, so it is anticipated that the company will have the ability to pay back creditors in full and has every chance of continuing to be a highly profitable company.

“At the end of 2019, following a difficult trading year, the board of directors took the decision to propose a CVA to creditors. The CVA delivers the maximum return to creditors, primarily through the realisation of the value in our property holdings.”

Phelan has entered into the agreement with assistance from restructuring and insolvency firm CVR Global.

It said despite the firm turning over £77 million and generating a profit of £1.2 million in 2018, the company encountered financial difficulties following the termination of a multi-million pound contract on a long-term hotel refurbishment.

The Mercury Theatre redevelopment, which is due for completion this year, will introduce an all-day café and space for community activities.

Steve Mannix, executive director of the theatre, said: “We are pleased to continue working with Phelan’s, and are delighted that our Mercury Rising capital redevelopment project is still running on time and on budget.

“We look forward to welcoming audiences to our newly renovated building for an exciting new season in the autumn.”