Pic: FT
October’s expected bloodbath as business rent protection ends; New Look’s desperate pleas for a CVA; and 1,200 care homes ‘will go bust in 2020’
As we enjoy a brief Indian Summer this September there is no wishing away the harsh chill of October to come for many businesses as the Government’s ban of evictions for non-payment of rent ends.
Pic: Londonister
Black October
Ian Carrotte of ICSM Credit has warned it could lead to a large number of company collapses as firms struggle to survive. He said: “Coupled with the ending of the furlough scheme it’s looking like a black October form many businesses. And as these firms fail there is bleak news for their suppliers who will find themselves with unpaid invoices.”
He issued advice for companies supplying goods or services to firms who have not been paying rent or have furloughed staff. “Be very circumspect over the credit you allow them,” he warned. “Any firm that is unable to pay its bills and has little or no income is insolvent and as soon as the carpet is pulled from underneath them will go bust.”
The Daily Mail reported that the trade body UK Hospitality has called on the Government to extend rent relief until the end of March 2021. They reported: “Retail and hospitality businesses face a 'bloodbath' of failures as landlords prepare to call in unpaid rent from lockdown. The Government's ban on evictions ends on October 1, meaning legal action can then be taken to evict tenants from thousands of shops, restaurants, bars and pubs.”
“Describing the prospect as a 'bloodbath', UK Hospitality's chief executive Kate Nicholls said: 'Later this month, many businesses will not be able to pay rent that is due. Thousands of sites and the jobs they support will be lost.'”
The BBC reported that restaurants and casual dining companies are also talking about a ‘bloodbath’. They reported: “Companies such as Deliveroo called for a targeted extension of the commercial evictions ban, which was introduced at the height of the pandemic. Revo, which represents landlords, said well-known firms were ‘getting away with not paying their rent.’”
But Revo, an industry body for commercial landlords, said: "The blanket moratorium means strongly backed, well known High Street companies are getting away with not paying their rent."
CVA plea from New Look
On the same subject the fashion retailer New Look has failed to find a buyer and has instead pleaded with landlords to their 496 shops to accept a company voluntary arrangement (CVA).
The struggling company’s hedge fund owners Brait want to put in place a CVA in order to restructure massive rent arrears and borrowings in order to survive. They have already threated the nuclear option of a pre-pack sale as that would essential dump most of the debts and unpaid rents and emerge in a smaller form with fewer shops under new owners. However a CVA would preserve the current retail chain and Brait would £40m in New Look through a debt-for-equity swap and save more than 10,000 jobs. Landlords and creditors will vote on the CVA on September 15.
The Four Seasons homes went bust last year
Care homes suffer collateral damage
Ian Carrotte of ICSM Credit said suppliers to care homes need to be very careful over taking purchase orders as the sector has been hit by the Covid 19 crisis.
“Before the Covid outbreak some 100 care homes would go bust a year,” he said. “Now with Covid 19 more will go to the wall. Every care home has a wide range of suppliers all of who are in danger of losing out if the home goes out of business.”
The Daily Mail’s Helena Kelly has reported this summer that around 1,200 homes will go bust this year. She reported: “One in ten homes face a collapse in income and soaring costs amid fears thousands of older people will have to move, experts warn.”
Ian Carrotte said that the numbers of residents in care homes has fallen dramatically this summer due to the increase in deaths but also the number families removing their relatives from homes. He said the numbers of people in care homes had fallen this year and this was causing the crisis in the care sector and their suppliers said the home had lost more than £40,000 due to coronavirus. They also said Nicola Richards, who runs Palms Row Health Care in Sheffield was in trouble as costs for PPE had increased along with agency staff costs with a fall in revenue as she had fewer residents.
A Care and Quality Commission report confirmed providers could go out of business because of a shortfall of income due to resident deaths and increased costs. Friary Lodge in London was forced to close its doors in the summer after the number of residents fell to just 14 while Chadderton Total Care Unit in Oldham lost 30 residents to the virus.
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.
For details about ICSM Credit call 0844 854 1850 or visit the website www.icsmcredit.com or email Ian at Ian.carrotte@icsmcredit.com on how to subscribe and to join the UK’s credit intelligence network to avoid bad debts and late payers. Follow ICSM Credit on FaceBook, Twitter and YouTube and Ian Carrotte on LinkedIn.
To keep up to date subscribe to the FREE ICSM Credit Newsletter to hear all the latest insolvency news and to see who has gone out of business click on the orange panel on the top left of the home page of the website www.icsmcredit.com or send an email to Ian.carrotte@icsmcredit.com
For details for the work of the journalist Harry Mottram visit www.harrymottram.co.uk