ICSM Credit News: Ann Summers set for CVA; boss banned as creditors left with £660,000 unpaid invoices; and the struggling firm that can’t get a bounce back bank loan
It seems incredible that this time last year the idea of a pandemic was confined to science fiction stories like Emily St John Mandel’s 2014 novel Station Eleven about a deadly flu epidemic or Michael Crichton’s The Andromeda Strain. Now every news story seems to have the words Covid-19 or pandemic in them and as for businesses, insolvency, CVAs and funding crisis’ are the order of the day.
Sex toys, lingerie and landlords
The Retail Gazette’s Elias Jahshan has reported on the latest crisis at sex toy and lingerie retailer Ann Summers. In early September ICSM Credit reported the firm’s chief executive Jacqueline Gold said the company might opt for a CVA as some landlords refused to work in partnership, despite the owning family injecting cash to keep the business afloat.
Now that prediction has come true as the trade publication retail Gazette reported this week: “Ann Summers has said that it is now likely to launch a CVA after it failed to negotiate better rental terms with some landlords. The lingerie retailer has now started talks with the British Property Federation, a move that would likely lead to the launch of the insolvency process. While Ann Summers highlighted that more than half of the landlords across its 90 stores agreed to change to turnover-based rents, the remaining would not budge and make that adjustment.”
Ian Carrotte of ICSM Credit said there were a trend amongst retailers to seek lower rents through a CVA as the Government had denied landlords temporarily the power of eviction. He said: “During this crisis high street stores who are solvent are taking the opportunity to negotiate better terms with an eye on 2021 when their competitors may have disappeared giving them an edge. It’s interesting to note that Ann Summers is actually doing quite well with sales up on the last quarter.”
He said that suppliers who are having trouble getting paid by firms seeking CVAs should look at their overall financial picture as not all of them are likely to fail. “If they are pleading poverty but have a healthy bank balance, then suppliers must get tough,” he added.
£660,000 unpaid invoices
The Insolvency Service has reported on the boss of St Andrews Motorhomes Limited in Fife who knowingly sold her customers’ vehicles at less than the agreed reserve price to third parties.
Christine Galloway has been banned from being a company director for eight years starting on September 7, following an investigation by the Insolvency Service after the firm was wound up in 2018.
The service said: “Between May 2017 and July 2018 St Andrews Motorhomes entered into 32 brokerage agreements, buying customers’ motorhomes and caravans, and offering an agreed return when the vehicles were sold to a third party. Investigators established, however, that in at least 18 of the 32 agreements, Christine Galloway sold the vehicles to a third party for less than the agreed return price in the brokerage agreement.
“21 of the agreements were entered into between January 2018 and May 2018. In this period Christine Galloway knew or ought to have known that the company was insolvent and was unable to pay the agreed return to customers.
“Further enquiries established that Christine Galloway entered into new brokerage agreements from May 2017 onwards but used customers’ funds to settle historic liabilities resulting from previous agreements. Following a similar pattern, these historic liabilities accrued from Christine Galloway being unable to meet the agreed return price when the vehicles were sold to a third party.
“During the liquidation, customers have claimed losses of just over £660,000 in connection with the 32 agreements. The affected customers also no longer own the vehicles as a result of Christine Galloway’s activities.”
Bounce bank loan denied
The BBC have reported on businessman Mike Hampshire who quit his IT job in 2018 to start a beer tour company in Leeds. All was going well until Covid-19 hit him. Simon Read reported: “The future of his Leeds-based business is in serious doubt as he's been unable to get a bounce back loan. Now the future of his Leeds-based business is in serious doubt as he's been unable to get a bounce back loan. In September, the chancellor extended the deadline for the government's coronavirus loan schemes to the end of November. Bounce back loans allow small firms to borrow up to £50,000 over nine years at preferential rates, with the loans 100% guaranteed by the government.”
Mike Hampshire is not the only small business owner fighting to survive without being able to get a loan through the government scheme said Ian Carrotte of ICSM Credit. He said: “Banks are handpicking customers and essentially look for businesses they access will be able to repay the loans and turn anyone away who they think is a risk or they don’t know however good their business is. That wasn’t what the scheme was designed to do and feeds into this notion that only ‘viable’ companies can survive. It rules out thousands of businesses and condemns them when they make up the entrepreneurial spirit of the country and are the big players of the future.”
The beer tour business came to an end in March and when pubs were allowed to reopen Mike Hampshire said social distancing made beer tours impossible.
The banking trade body UK Finance claimed the majority of business applicants had been able to get loans with £1.2m lent to small businesses.
access the finance they need" through the scheme which has lent £38bn to 1.26 million smaller businesses. He said that the 28 accredited lenders cover most businesses but less likely to lend to new customers.
But he said that of those 28 lenders, only "one or two" will give a bounce back loan to new customers. Like many small businesses Mike Hampshire then applied to a string of well-known banks but each time ‘the computer said no.’
The deadline for bounce back loan applications is 30 November.
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