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More Administrators Needed to Cope with Retailer’s Collapse

When companies fall into insolvency the courts are often heavily involved in ensuring that creditors’ interests are properly protected. That was certainly so in one case in which the High Court sanctioned the appointment of two additional administrators to assist in the immense task of settling the affairs of a troubled national retailer.

The retailer reported a trading loss of £69 million in 2014 and, after that, its financial position only got worse. Its sole shareholder sold it to another company for a nominal sum and, as part of the deal, agreed to write off £215 million of inter-company debt. The seller retained a £40 million floating charge over the retailer’s assets in respect of other debts.

Trade did not improve and the retailer eventually entered into a company voluntary arrangement with the approval of creditors. A hoped-for refinancing package subsequently failed to materialise and two administrators were appointed by the board. The retailer’s largest unsecured creditor was the Pension Protection Fund (PPF), which was owed an estimated £571 million. It was anticipated that sufficient funds would be raised to satisfy the seller’s floating charge in full.

The administrators had continued to trade the business on the basis that that was likely to achieve a better outcome for creditors as a whole than a swift winding up of the retailer. At the PPF’s behest, the administrators had launched an inquiry into the company’s affairs and, in particular, the circumstances of the retailer’s sale.

The administrators were fully engaged in the task of concluding trading activities and asset realisations ahead of a creditors’ voluntary liquidation. In those circumstances, the Court approved the appointment of two further administrators so that the inquiry could be pursued without delay into any possible claims that the retailer may be entitled to bring against its current or former directors.