Pic: Retailer Monsoon have been under pressure
Latest ICSM Credit News: Monsoon and other retailing troubles; Intu enters administration, Non-Standard ‘on the brink’; various CVAs and pre-packs; and more news of firms in trouble and who to avoid
Company Rescue have reported on research by accountants KPMG on under pressure UK firms with concerns raised over the retail sector. The insolvency specialist noted: “KPMG analysed account filings of UK businesses with revenues in excess of £10 million over a five-year period to the end of 2018. It was found that over all, one in five UK businesses are financially stressed, with over 1,000 companies in situations of acute distress.”
ICSM Credit has seen a growth in firms having problems with cash flow created by an economic slowdown in 2019 and the Covid-19 crisis this year.
Stressed out Intu
They have been struggling for some time with vast debts but the curse of Covid-19 has forced the owner of some of the UK’s biggest shopping centres, Intu, into administration. However the firm that owns the Trafford Centre, the Lakeside complex, and Braehead, will continue to keep its centres open while KPMG seek a solution. Intu tried to seek an agreement with its lenders before throwing in the towel and facing the inevitable.
“Shoppers shouldn’t be too concerned as someone will buy all or parts of the vast Intu empire,” said Ian Carrotte of ICSM. “Even without shops those centres are prime real estate. The administrators will keep the centres open while they negotiate with lenders and hopefully find a buyer.”
Thousands of people in the UK who use Wirecard cannot access their cash today after the FCA has frozen the Newcastle based credit outfit’s operations. The UK licence of Wirecard Card Solutions has been frozen after its parent company filed for insolvency in Germany. In the meantime business people and many self-employed will be unable to pay bills, rent and many other services vital for business.
The BBC defined Wirecard Card Solutions as a company that serves prepaid cards, such as the U Account, which marketed itself as an alternative to a bank which helped people to budget and avoid hefty overdraft fees. They said: “The regulator, the Financial Conduct Authority (FCA) said it had ordered Newcastle-based Wirecard Card Solutions to cease all regulated activities in order to further protect customer money”.
The BBC reported that the funds are not protected, as they are in banks, by the Financial Services Compensation Scheme, but the firm said customers’ money was held safely in segregated accounts but the FCA has told people affected to contact their card provider. Wirecard last week disclosed a £1.7bn hole in its accounts, tipping it into insolvency.
You say Carillion, I say Capita
Two and a half years ago Carillion went bust leaving millions of pounds in unpaid bills with their vast range of suppliers, thousands of jobs trashed and a string of unfinished new builds including half-finished schools and hospitals. Parallels have been drawn with Capita who have struggled in recent times as debts mount and the curse of Covid-19 takes a hit. The vast out sourcing firm that has Government contracts taking up much of its work employs more than 60,000 people and has started laying off staff. More of a concern is that it has seen its share price plummet to just 43p from 183p at Christmas.
“Capita has been flagged up for months now as being in danger,” said ICSM Credit’s Ian Carrotte, “The Carillion affair was a total disaster – especially as like Capita – those in the know kept saying all was well – and we know what happened eventually. Never give credit unless you are guaranteed of payment to a firm that is clearly in trouble is my advice.”
Finance firm in trouble
Lucy White writing for the Daily Mail reported last week that lender Non-Standard was ‘on the brink’ of collapse. She said: “Non-Standard Finance (NSF), which owns the Everyday Loans, Loans at Home, George Banco and Trust Two brands, said there was ‘material uncertainty’ surrounding its ability to keep operating. Shares fell 30.2 per cent to a record low of 8.03p, having been trading at close to 70p early last year. Just over a year ago, the firm was boldly pushing ahead with a £1.3billion hostile bid for rival Provident Financial.But yesterday it reported a loss before tax of £76million for 2019, after forking out £12.8million of fees relating to the failed Provident deal and writing down the value of its businesses.”
Ian Carrotte of ICSM Credit said: “The decline has been blamed on borrowers unable to pay up or not taking out new loans due to the Covid-19 crisis but that flies in the face of the facts. Last year they make a massive loss. It’s become the easy way to blame failure, a bit like last year when collapsed firms blamed Brexit for their liquidation.”
Pre-packs for tents and shirts
Go Outdoors has been bought in a pre-pack by its parent company JD Sports adding another layer of controversy over the scheme aimed at saving the jobs of collapsed companies. The firm that sells camping equipment and other kit for use in the great open spaces of the UK said it had been hit by the Covid-19 crisis with no footfall for three months.
“It’s not a good look,” said Ian Carrotte of ICSM Credit, “as the suppliers won’t get paid and since the firm was already struggling before the lock down then it is likely to find trading tough again. In the meantime all those firms that supply the goods are left high and dry.”
He said a similar situation was possible at the shirt company TH Lewin. The firm’s new owner is said to have drafted in restructuring experts to seek an arrangement that may lead to the closure of the majority of its 66 stores. The Sunday Times reported that restructuring firm, ReSolve, was called in for the menswear retailer to make the brand move online with just a few stores.
Ian Carrotte pointed out it had become a trend during the Covid-19 pandemic as other retailers were using pre-packs to be re-acquired by their owners such as retailers Quiz, Kath Kidston and Monsoon Accessorize.
Virgin Atlantic’s funding struggle
Sky News have reported this week that Virgin Atlantic Airways is ‘racing to stitch together a £900m privately funded rescue deal within days after concluding that it was unlikely to secure an emergency government bailout.’
The news network said: “We can reveal that the airline founded by Sir Richard Branson in 1984 has substantially increased the size of its proposed refinancing amid forecasts of a protracted post-coronavirus recovery for the aviation industry.”
City sources said that Virgin Atlantic, led by chief executive Shai Weiss, was now targeting an overall package of at least £800m and potentially as much as £900m, as talks with a wide range of stakeholders continue before a deadline in early July. If the talks fail and the Government also refuses to help then the airline would enter administration.
“My understanding is that a pre-pack has already been lined up,” said Ian Carrotte of ICSM Credit. “It’s the go-to strategy in these situations as nobody is going to let an airline that size disappear. The losers will be the creditors and staff. That’s why no one in their right mind should offer credit to firms in danger of collapse.”
Liverpool hotel bought out of administration
Legacy Hotels have acquired the famed Liverpool hotel 30 James Street from the administrators. The Liverpool hotel was run by Signature Living until it went into administration last month as the development group fell into financial trouble. It is one of a number of companies within the Signature Living group to go bust.
About ICSM Credit
ICSM Credit has more than four decades of experience as a credit intelligence group whose members gain inside information about firms in trouble allowing them to avoid bad debts and rogue traders. To join costs less than a tank of fuel – while at the moment there’s a special free temporary membership offer during the Covid-19 crisis which gives access to free legal letters. ICSM also has an effective debt collecting service which has a global reach – ask for details from Paul.
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For details for the work of the journalist Harry Mottram visit www.harrymottram.co.uk