Woolies creditors emerge amid fears of 'messy' collapse
Simon English28.11.08
Creditors of Woolworths began to emerge today, a sign the fallout from the collapse of the once-loved retailer could be protracted and messy.
Metrodome, a distributor of films on DVDs, said that Woolies' Entertainment UK arm was one of its biggest customers. It claims to be owed £320,000 by the company - money it is not sure it will get back.
Woolworths and its subsidiaries fell into administration this week after talks with a potential buyer failed.Stores remain open, but are likely to embark on big price cuts in a bid to gather as much cash as possible.
Deloitte, the administrators, say they have had offers for the business but details are sketchy. Supermarket groups such as Tesco and Sainsbury may target properties that would suit the convenience-store format.
A buyer would face debts of £385 million, a gaping hole in the staff pension fund, and more than 600 individual landlords who hold the leases on the 813 shops. Metrodome said in a statement this morning it is "unsure as the recoverability of this sum" and is "seeking clarification" about what happens next.
The announcement from Metrodome will fuel the sense of panic around Woolworths. Other suppliers are unlikely to provide the stores with goods without cash upfront. Bankers have declined to give Woolies breathing space.
A restructuring plan devised by the board was rejected by lenders, including Barclays and Bank of Ireland. Retail restructuring specialist Hilco walked away from talks to takeover the business this week. It has now been appointed to help manage the stores.
Retail analysts fear Woolies could have a damaging effect on other retailers. If it slashes prices, rival shops may have to follow suit, further eroding already thin margins.
Deloitte has told staff they will keep bein paid but, 30,000 jobs are clearly at risk.Woolworths, founded in the United States, has been a feature of the UK High Street since 1909.
Reader views (4)
who are these 600 landlords can they pay their bills if no rent is paid, are they highley geared ,will they pay the price for not allowing monthey payments instead of the three months in advance which supports their payments
- Yori Summer, someset
Upsetting to hear the news of this great store, i loved it as a child and so does my 4 year old! I hope somebody can save it!!!
- Woolies Fan Since Age 3!, London
So here's how it works. Suppliers (creditors) create cash flow problem for Woolworth's becasue they can't get credit insurance to cover the 'risk' of default. Woolworths then goes into liquidation, suppliers now risk losing even more. Perhaps they should have extended credit in the first place, with or without insurance..?
- Fiscally Stimulated, London
I've never seen my local Woolies as busy for a long time.
- Mike Melbourne, Bedford England
Afternoon:
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