Creditors face £13m Walmsley's debts
Collapsed furniture retailer Walmsley's owed unsecured creditors more than £13m when it entered administration. But businesses and landlords are expected to recoup just 3 per cent of the cash due to them.
The Wednesbury-based company, which entered administration in late August, was sold in a pre-pack deal for £250,000 new documents have revealed. The rescue deal ensured that 25 of its 63 stores remained open and also preserved 100 jobs.
But unsecured creditors are owed a total of £13.5m as a result of the failure, with £5m due to landlords, £7.4m to trade and expense creditors, and £1.1m to HM Revenue & Customs. Administrators from insolvency firm Leonard Curtis estimate just £364,941 will be available for them to claim.
Unibrook, which traded as Walmsley's, entered administration on 31 August 2011 after hitting cashflow difficulties. According to a statement of the administrator's proposals, the company's directors found deferred rent payments and PAYE/NIC arrears "increasingly difficult to manage" in the run up to their appointment.
The troubles followed a decision by one of its major suppliers to pull the plug on supplies at the end of 2010, forcing it to spend about £2m to restore its supply chain.
This led the company approaching its bankers Allied Irish Bank (AIB) in June to seek assistance for the ongoing cashflow problems. AIB then appointed Leonard Curtis to review the company's financial position.
The administrators' statement said a pre-pack sale was "deemed necessary" upon appointment as the company had been "operating under significant financial constraints since April 2011 and creditor pressure was beginning to build".
The bank is the sole secured creditor, whose debt of £316,549 is expected to be paid in full. Preferential claims relating to wages total £27,000, but all employees were paid in full to 31 August so claims were "minimal".
Leonord Curtis said that after exploring several options available, the administrators plan to move the company into creditor's voluntary liquidation to enable a dividend to be paid out to the unsecured creditors.
At the date of their appointment, the administrators said Walmsley's was owed more than £40,000 from debtors including Cavalier Carpets and Barclays Partner Finance. The largest debt was owed from various housing associations and not-for-profit organisations which totalled £14,923.
The failure is the retailer's second in the past six years after administrators were called in from Deloitte in late 2005. The company was then rescued by a new business called Unibrook, set up to complete the deal, and which included four shared directors.
It reported turnover of £21.7m in 2011, compared with £25.8m in the previous year. It also made a loss of £724,979 in the last financial year, compared with a profit of £158,910 in 2010.
Walmsley's can trace its roots back to1933 and specialised in selling sofas, beds and dining furniture. It was formerly headquartered in Preston, before management switched its head office to Wednesbury in the Midlands.
