Commercial property landlords are among a group of unsecured creditors who are set to receive nothing at all following the collapse of home improvement retailer Focus DIY the Guardian reports. Focus went into administration in May following a pre-tax loss of £21 million. Now administrators Ernst and Young say there is only £600,000 remaining to pay unsecured debts of £820 million and that suppliers, customers, staff and landlords will be left out of pocket.
Crewe based Focus DIY was founded in 1987 with an initial 6 retail commercial properties throughout the Midlands and the North of England. By the time it issued the notification that it was about to default on its debt in May it had 178 branches across the UK with annual sales of £450 million. Since then, Ernst and Young have managed to sell 60 stores to other retailers including rivals B&Q and Wickes. This has secured the jobs of around 1,200 of Focus’s 4000 staff. In addition the administrator has succeeded in transferring the leases of a number of rented commercial properties to the likes of Kingfisher and Asda raising £45 million.
These moves have assisted Ernst and Young in being able to settle with Focus’s secured creditors GMAC and the Bank of Scotland who have now been paid outstanding debts of £32.2 million in full. Another private investment firm has had to settle for only a partial repayment of the £214 million it was owed. However, the £600,000 available to settle the claims of unsecured creditors would result in each of the 15,000 claimants receiving just 1p for every £1 owed. This, the administrators claim, makes any pay-out a pointless exercise.
A breakdown of the money owed to unsecured creditors shows that suppliers, including many small businesses, are owed over £61 million. Employees, the majority of who lost their jobs, are owed over £15 million in unpaid wages and settlements. Outstanding customer orders account for around £3 million with the rest being owed to other creditors including commercial property landlords.
A statement issued by Ernst and Young says they were pleased to be able to operate the business for 11 weeks despite difficult trading conditions which brought in £100 million in sales. They are also pleased to have recouped around £46 million from commercial property sales. They also revealed that the Focus DIY brand had been sold to MFI owners the Walker Group for £300,000 raising the possibility that the retailer could be re-launched at a later date.
The collapse of Focus wasn’t a surprise to market analysts. The DIY sector has been facing difficulties for some time due to the downturn in the housing market. With people not moving and a shortage of first time buyers the demand for home improvement products has seen a significant fall. The fact that not many years ago the industry was booming has led to a number of companies operating in the sector and retail analysts have been warning for some time that there is not enough room in the market for so many big players.
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