Edinburgh Woollen Mill on the brink of insolvency with 24,000 jobs at risk

The high street fashion chain, which owns Jaeger and Peacocks, said there ‘will inevitably be significant cuts and closures’.

High street fashion chain Edinburgh Woollen Mill (EWM), which owns Peacocks and Jaeger, is close to collapse, with 24,000 jobs in the balance, according to documents filed with the High Court.

The company has lodged a notice of intention to appoint administrators to look for potential buyers to shore up the struggling business.

Bosses wrote to staff on Friday morning, warning them that the national and local lockdowns had hit sales very heavily.

The company added that it has been hit hard by allegations, which it denies, that the retailer and several rivals failed to pay some Bangladeshi suppliers during lockdown in an attempt to cut costs for clothes they were unlikely to sell.

The move by EWM, owned by businessman Philip Day, will see insolvency specialists at FRP spend 10 days carrying out an urgent review ahead of further action.

All stores will continue trading and further details will be announced in due course, the company added, but significant changes are expected.

EWM chief executive Steve Simpson said: “Like every retailer, we have found the past seven months extremely difficult.

“This situation has grown worse in recent weeks as we have had to deal with a series of false rumours about our payments and trading which have impacted our credit insurance.

“Traditionally, EWM has always traded with strong cash reserves and a conservative balance sheet, but these stories, the reduction in credit insurance, against the backdrop of the lockdown and now this second wave of Covid-19, and all the local lockdowns, have made normal trading impossible.

“As directors we have a duty to the business, our staff, our customers and our creditors to find the very best solution in this brutal environment.

“So we have applied to court today for a short breathing space to assess our options before moving to appoint administrators.

“Through this process I hope and believe we will be able to secure the best future for our businesses, but there will inevitably be significant cuts and closures as we work our way through this.

“I would like to thank all our staff for their amazing efforts during this time and also our customers who have remained so loyal and committed to our brands.”

An FRP spokesman said: “Our team is working with the directors of a number of the Edinburgh Woollen Mill Group subsidiaries to explore all options for the future of its retail brands Edinburgh Woollen Mill, Jaeger, Ponden Home, and Peacocks.”

The move came just hours before Chancellor Rishi Sunak was expected to unveil new plans for protecting jobs and businesses hit by the second wave and new measures.

Source: Express & Star

Regus’ Insolvency Threat, Hygge Cancels Expansion Plans, And More

IWG Set to Place Regus into Insolvency

Following news that it had filed for Chapter 11 bankruptcy for some of Regus’ US affiliates, International Workplace Group (IWG) recently announced that it plans to file for insolvency for Regus in the hopes of getting IWG “off the hook for £790m of lease agreements, spread across 500 properties.” A statement from the company argued that “IWG resorted to insolvency measures because the COVID-19 pandemic is a black swan event and it has severely impacted business and presented it with unforeseen challenges.”

Hygge Reverses Expansion Plans

Coworking space operator, Hygge, had plans to add square footage to its workspace portfolio this year. However, the COVID-19 pandemic has altered those plans. Bizjournals reported this week that “the pandemic has forced Hygge to end its lease for a 21,000-square-foot expansion at its flagship West Hill Street location.” The coworking operator had signed the lease before the pandemic hit, however due to pandemic, the coworking space lost half of its members and over $10,00 in monthly memberships. Ending the lease, according to Hygge’s founder, “was the right decision to protect the business moving ahead” as it will provide the company with a little more runway to weather the storm.

New WFT Orders a “Devastating Blow” to UK’s Flexible Workspace Industry

Last week, The UK government advised people in  England to go back to working from home in hopes of reducing the UK’s rise in COVID-19 cases. According to Jane Sartin, Executive Director of FlexSA, the statement “was a devastating blow to the flexible workspace industry” arguing that recent early signs of new clients have “immediately ceased” following the announcement. Furthermore, flexible workspace operators in the UK are concerned about the long-term financial impact on their businesses, especially considering that  many had already made huge investments in safety measures in order to welcome workers back into their spaces.

Source : allwork.space

Business Financial Distress UK

Government gives businesses much-needed breathing space with extension of insolvency measures

Measures from the Corporate Insolvency and Governance Act extended to relieve pressure on businesses dealing with coronavirus.

Measures put in place to protect businesses from insolvency will be extended to continue giving them much-needed breathing space during the coronavirus (COVID-19) pandemic, the government announced today (24 September).

A raft of changes to protect businesses from insolvency were introduced in the Corporate Insolvency and Governance Act and were due to expire on 30 September 2020. The temporary measures include:

  • companies and other qualifying bodies with obligations to hold AGMs will continue to have the flexibility to hold these meetings virtually until 30 December 2020. This means that shareholders can continue to examine company papers and vote on important issues remotely
  • statutory demands and winding-up petitions will continue to be restricted until 31 December 2020 to protect companies from aggressive creditor enforcement action as a result of coronavirus related debts
  • termination clauses are still prohibited, stopping suppliers from ceasing their supply or asking for additional payments while a company is going through a rescue process. However, small suppliers will remain exempted from the obligation to supply until 30 March 2021 so that they can to protect their business if necessary
  • the modifications to the new moratorium procedure, which relax the entry requirements to it, will also be extended until 30 March 2021. A company may enter into a moratorium if they have been subject to an insolvency procedure in the previous 12 months. Measures will also ease access for companies subject to a winding up petition. The temporary moratorium rules will also be extended to 30 March 2021

Business Minister Lord Callanan said:

It is vital that we continue to deliver certainty to businesses through this challenging time, which is why we are now extending these important and necessary measures to protect companies from insolvency.

Through this measure, we want to ensure businesses are able to not only come through this testing period, but also to plan, adapt and build back better.

Additional information

  • businesses will be protected from the threat of eviction until the end of year following an extension to the commercial eviction ban announced on 16 September 2020
  • this extension will protect businesses that are struggling to pay their rent due to the impact of COVID-19 from being evicted and help the thousands of people working in these sectors feel more secure about their jobs
  • the government is clear that where businesses can pay their rent, they should do so, as this support is aimed at those struggling the most during the pandemic. This is set out in the Code of Practice which was published in June.


August personal and corporate insolvency statistics, R3 response

  1. Corporate insolvencies fell to 778 in August 2020 compared to the previous month’s figure of 961 and are significantly lower than they were in August 2019 (1,369).
  2. Personal insolvencies fell to 6,359 in total compared to last month’s figure of 7,330 and are significantly lower than August 2019’s figure (8,892).

Call to extend Covid-19 insolvency protection

The government should extend emergency Covid-19 insolvency measures or risk seeing a raft of company collapses and job losses later this year, the Institute of Directors (IoD) has warned

Under normal circumstances, directors have a strict duty to cease trading if their company is facing insolvency and may face financial or legal liabilities if they seek finance instead of doing so. In June, the government introduced emergency coronavirus legislation to suspend the threat of liability for such 'wrongful trading'.

This protection runs out on 30 September, and the IoD said that failure to extend the measure could lead to 'entirely preventable company collapses'.

The institute argued that the measures should be extended to the end of the year, to aid the economic recovery from the pandemic and to safeguard jobs.

Roger Barker, the IoD’s director of policy and corporate governance, said: ‘The recovery has begun, but businesses are not out of the woods yet. As we start to emerge from the pandemic, many normally successful small firms are in a perilous position, and we must give them a chance to get back on their feet.

‘The government has rightly supported business survival, and emergency legislation in June was an important step. The need for this support has only intensified as we enter the next stage of the recovery. Firms trying to adjust will face steep costs and limited revenues.

‘Without these measures, we could see some entirely preventable company collapses, putting our economic recovery and jobs at risk. Directors must be in a position to see their organisations through the crisis - they shouldn't be penalised for acting responsibly amid unprecedented circumstances.’

The Corporate Insolvency and Governance Act 2020 became law on 25 June 2020. The emergency legislation introduced a time-limited suspension of liability for wrongful trading applying from 1 March to 30 September 2020.

Before the emergency measures were introduced, under the Insolvency Act 1986, the board of directors has a strict duty to announce a cessation of trading if the company is insolvent – or if insolvency cannot realistically be avoided in the near future.

In that situation, the 1986 Act requires a company to be placed into an insolvency procedure – such as administration or liquidation – in order to safeguard the interests of the company’s creditors. Under the 1986 Act, failure to do so carries the risk of personal liability.

The suspension of wrongful trading does not affect directors' wider liabilities under company law, for instance around fraudulent trading.

Source: accountancydaily

UK insolvencies to rise by over a quarter this year - credit insurer Atradius

Insolvencies were down in H1, but will end up 27 per cent above last year's

Insolvencies in the UK are set to jump 27 per cent this year as the fallout from the coronavirus continues, according to Atradius.

The credit insurer said that the growth in companies going bust will outpace the global figure (26 per cent), with the UK also seeing the largest GDP contraction in Northern Europe.

Turkey is expected to see the largest growth in insolvencies globally at 41 per cent, followed by the US and Hong Kong at 39 per cent.

Simon Rockett, senior underwriting manager for Atradius UK, said: "The coronavirus pandemic has been indiscriminate in its spread across the globe, resulting in lockdowns and containment measures which have had a tangible impact on economic markets.

"This has included delays in production, a drop in business and consumer demand and widespread business closures.

"While many countries have implemented fiscal stimulus measures to soften the blow, these cannot last forever and worldwide economies are starting to realise the true economic impact in the form of recession and a bleak return to rising insolvency levels."

Atradius said that the number of insolvencies in the UK were "peculiar" in H1, seeing a decline of 20 per cent year on year which did not reflect the state of the economy.

The credit insurer said that this was likely because the UK had announced changes to its insolvency regime prior to the pandemic. Temporary measures are also in place for struggling businesses until the end of this month.

The lowest increases globally will all be in Europe, Atradius said, naming Germany, France, Austria, Belgium, Switzerland and Italy.

But Atradius said that the increase in the UK is forecast to be less than during the Great Recession in 2009.

It also said that the number of insolvencies will stay relatively high in 2021, but will decline one per cent against the total figure for 2020.


Source: channelweb

Restructuring experts prepare for fresh wave of UK company failures

The press are reporting that there will be an expected upsurge in insolvency appointments in the coming months.

Unfortunately, we feel that given the recent market conditions and the reductions in government support, that this will be inevitable.

As a practice we have been able to use the lockdown period to increase the size of our team and strengthen our working practices so we are well-equipped to deal with new and urgent matters.

We would encourage business owners to think carefully about their business structure, whether market conditions have changed and what they can do to adapt to those changes. If they are in financial difficulty, or they are unsure whether their business will still be profitable, we recommend they seek advice as early as possible.

If you or your clients are worried about your position or have been affected by the insolvency of a customer or supplier, we would be happy to discuss it with you. Please contact.

Source: Financial Times

Business Financial Distress UK

Co-operative Bank to cut 350 jobs

The Co-operative Bank has announced proposals to reduce 350 roles and the closure of 18 branches.

In a statement, the bank explained that aside from the specific branches affected, the reduction is expected to focus on middle management positions and head office roles.

The bank said that where possible, it will be looking to redeploy workers.

Co-operative Bank chief executive, Andrew Bester, said: “Unfortunately, we’re not immune to the impact of recent events, with the historically low base rate affecting the income of all banks and a period of prolonged economic uncertainty ahead, which means it’s important we reduce costs.

“At the same time, we are responding to the continuing shift of more and more customers choosing to bank online, with lower levels of transactions in branches, a trend which has been increasing for some time.

Bester added: “The bank is in a resilient position given the significant progress we’ve made in recent years, and our focus is on maintaining this as we continue to support our customers through the crisis.”

Source: Credit Strategy

STA Travel parent company files for insolvency

The Zurich-based parent company of student and youth travel specialist STA Travel is to appoint an external administrator.

STA Travel Holdings AG says “day to day“ operations in the UK are unaffected and that this process only affects the Swiss business.

STA Travel Holdings Switzerland says “consumer uncertainties” mean sales have not picked up and “the global magnitude of the pandemic crisis has brought the travel industry to a standstill, including STA Travel”.

The company says it expects “further restrictions and renewed lock-down measures” to continue into 2021.

STA Travel has 54 outlets in the UK with a focus on long haul “gap year” and adventure trips.

Many of its flights and holidays are ATOL protected and it is a member of ABTA. STA Travel Holdings AG says it “very much regrets to not have been able to secure the future of the business under these unprecedented circumstances”.

In a statement the STA Travel UK said: Following the decision to place STA Holdings, the parent company of STA Travel, into administration each division’s Country Manager and leadership team is now reviewing its own position.

"Further information will be confirmed as soon as finalised".

Source : itv.com

UK’s new insolvency process should worry company creditors around the world

Virgin Atlantic’s rescue deal is something of a watershed in how companies can escape insolvency.

Virgin Atlantic’s rescue deal is something of a watershed in how companies can escape insolvency. The deal, which will involve Richard Branson and US hedge fund Davidson Kempner Capital Management injecting US$1.6 billion (£1.2 billion) into the airline, uses the new restructuring plans made possible by the UK Corporate Insolvency and Governance Act 2020.

While most creditors have accepted the rescue deal, the approved restructuring plan will also bind those who are against it. The UK procedure has also been recognised by a court in New York so it protects Virgin’s American assets as well as its British ones.

The new Act is quite a shift from the old UK insolvency rules. There’s always the need to find a trade-off between protecting creditors and enabling business rescues, but the new rules mainly promote rescues, and there is little additional protection for disgruntled creditors. With the fallout from COVID-19 likely to lead to many more collapses, the implications are considerable. And, just like in the Virgin case, this looks set to affect creditors’ rights around the world.

Controversial insolvencies

In the UK, there have been significant controversies concerning the use of pre-packaged administrations (also known as pre-packs). Particularly popular in the early 2000s, pre-packs allow failed businesses to be sold to the best bidder using a pre-negotiated (“pre-packaged”) agreement between the debtor and the buyer.

Though pre-packs minimise costs, delays and negative publicity, they quickly became a way for distressed businesses to be sold for a pittance to a buyer connected to the debtor. The debtor’s shareholders retained control and the creditors (and taxpayers) received little or nothing.

The government tightened up the rules in 2015, requiring that businesses be properly marketed and introducing a pool of independent experts to guide creditors over whether a proposed sale was reasonable.

These changes largely worked, and pre-packs continue – such as the recent rescue of forex services group Travelex. But they don’t work where groups of creditors obstruct them, and practitioners have long lobbied for more instruments to rescue distressed businesses.

The traditional rescue route for companies is to enter administration and either do a deal with creditors known as a company voluntary arrangement (CVA), or get a court order known as a scheme of arrangement to impose the deal on any creditors unwilling to accept it. Both use lots of time and money, and come with strict rules.

The government had long promised reform, but the COVID-19 pandemic meant this could no longer be delayed. Among the new rules designed to facilitate rescue is the new restructuring plan procedure. Much to the approval of the industry, a rescue can now be imposed on dissenting creditors with a court order (known as a “cross-class cram-down”), provided that some conditions are met. Additionally, the rules around the level of creditor approval required for these plans to be permitted are more relaxed than for CVAs and schemes of arrangement.

The order of priority that applies in liquidation cases is not strictly binding in restructuring plans either. Normally creditors must be paid in ranking order – so that, for instance, mortgage holders are paid before trade creditors. Usually this means that lower-ranking creditors receive nothing, and that a higher-ranking class can block a debt repayment plan. Now it is easier to sidestep them.

Admittedly, courts must first be satisfied that dissenting creditors will be no worse off than with any alternative plan (normally a pre-pack). Yet UK courts have proved reluctant to question the judgement of those running the company, thus further limiting the creditors’ protection.

Restructuring plans can also be carried out by companies with the most tenuous connection with the UK (unlike CVAs, which require companies to be mainly focused on the UK or either registered here or in the European Economic Area). For the court to find a “sufficient connection” with the UK, it may even suffice that restructuring negotiations were carried out there.

Since Virgin Atlantic is a UK company, there is no such problem here, but recall that that deal has been recognised by a New York court. This is because both the US and UK have adopted the UNCITRAL Model Law on cross-border insolvency, which means they recognise insolvency procedures initiated in one another’s countries. Many other countries are also parties to this framework, so companies with little connection to the UK will probably be able to use the rules to protect themselves from creditors worldwide.

The problem with rescues

Giving companies more protection from creditors is not necessarily a bad thing, of course. If you rescue a company, you save jobs. But not always. A “rescued” company whose business is fundamentally broken is a “zombie” company, a sort of parasite in our economy. It may crowd out viable businesses, or push unpaid creditors over the edge. Also, the money lost by the government in failed rescues could be spent more usefully.

Take Debenhams’ restructuring saga. Debenhams was rescued in April, after sales plummeted under lockdown. The process is likely to result in a sale of its remaining profitable assets by the end of September.

But this is the third time in less than a year that Debenhams has gone through an insolvency procedure. During both previous attempts, suppliers and creditors went totally or partially unpaid. Debenhams also received state COVID support, for instance through the job retention scheme and the postponement of taxes that were due.

The retailer now continues as a going concern without fully paying landlords and suppliers – except essential ones – due to being in administration. And it is quite likely that more creditors will end up unpaid as a result of the latest rescue.

Should we turn the clock back to the good old days in which companies were liquidated and businessmen sent to prison for failing to pay their suppliers? Far from it. But the risks associated with restructuring plans seriously need to be discussed.

The government should introduce more stringent eligibility and approval criteria to ensure that only viable businesses are rescued. For example, restructuring plans could be made available only to companies heavily involved with the UK, and the additional voting requirements applicable to CVAs and schemes should be extended to the new restructuring plans. Unless we move quickly, we can expect a lot more zombie companies and distraught creditors in the months ahead.

Source: Australian times