City Link collapse leaves suppliers 39m out of pocket:RM 1M

[POSTMAN]

City Link collapse leaves suppliers £39m out of pocket

Suppliers are only likely to recover a total £600,000 from the failed parcel delivery service

http://www.telegraph.co.uk/finance/news ... ocket.html

City Link owed its suppliers £30m when it controversially collapsed into administration on Christmas Eve, documents from the company’s directors have revealed.

The failed delivery company, which was losing around half a million pounds a week when it toppled, owes millions to small businesses who are unlikely to recover more than a few pence in the pound.

City Link had a shortfall of £62.5m when it appointed administrators at EY. Hunter Kelly, administrator at EY, clarified that while suppliers are owed £30m they will only recover a total maximum pay-out of £600,000 .

The supplier that faces the biggest loss is a family-owned business in Nottingham, according to the accounts. Barcode Warehouse, which has been in business for over 20 years and supplies handheld digital devices used for parcel delivery signatures, has been left £2.2m out of pocket from the collapse.

City Link employees are owed £1.28 in unpaid wages, holiday pay and pension contributions while HM Revenue and Customs is owed £5m in PAYE, VAT and national insurance.

Royal Mail is also owed £1m in debts from the collapse, a list of creditors showed.

Employees are expected to receive the full amount of liabilities but neither City Link’s suppliers or the taxman will be able to recover their full amounts.

However, former private equity owner Better Capital is in line to recover around £20m of the £40m loan it invested as it is a secured creditor.

Better Capital had already written down the value of its investment by half after a turnaround at City Link failed to work.

Pest-control business Rentokil, which sold the business for £1 to Better Capital in 2013, is first in the queue for recompense ahead of the private equity firm and will collect roughly £5m of a £29.8m pool set aside for the secured creditors.

“It’s a big, unpleasant insolvency, there is nothing nice to say about it”, Jon Moulton commented.

Mr Ross Lee, managing director of Barcode Warehouse said that his business had been cushioned by the collapse after beating its turnover and profit forecasts for the year.
“Obviously, if we hadn’t got the bad news over Christmas we’d have been flying. I think we’re all just going to have to be a bit more careful when dealing with private equity backed firms in future” Mr Lee said.

Mr Moulton said that it was unlikely Barcode Warehouse had dealt or had any communication with Better Capital and was more likely to have dealt with the company’s management.

The turnaround veteran also stressed that Better Capital had been honest about City Link’s difficulties when updating the market and writing down its investment. EY said that the value of Barcode Warehouse’s scanners would likely be recovered.

David Kelly, EY administrator will be making proposals to creditors this week.

[Lounge Lizard]

"City Link employees are owed £1.28 in unpaid wages, holiday pay and pension contributions" - could be a lot worse.

[Pinky 1]

Employees are expected to receive the full amount of liabilities

...... well, some good news