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Blue Inc property deals prolong administration

Blue Inc subsidiary A Levy has extended its administration for a further 12 months while it continues to negotiate store leases and payments to unsecured creditors.

Blue Inc Portadown

Administrators from Leonard Curtis were appointed to A Levy on 19 January 2016, resulting in the closure of 76 of Blue Inc and Officers Club stores and the loss of an estimated 580 jobs. Blue Inc bought parts of the business back that same day, saving 1,500 jobs across its remaining 157 stores.

As part of the sale, Blue Inc was granted a licence to occupy the 157 stores for 12 months from the date of its administration, while negotiations on the leases took place.

However, only 119 of the leases had been assigned, surrendered or vacated, to date, the administrators have confirmed. Two stores have closed and the remaining 36 are still occupied under licence, so a further six months is needed for the leases to be assigned. 

As a result, A Levy’s secured creditor – Blue Inc – and its preferential creditors have given their consent to extend the administration until 18 January 2018.

A progress report filed at Companies House this month revealed that Blue Inc has been paid £1.65m of the £4.3m it was owed. It is thought a further £11,000 will be paid to the firm.

Preferential claims, made up of former employees who were owed wages and holiday pay, were paid in full, totalling £545,571.

The amount available to its non-preferential creditors, including suppliers and landlords, is thought to be £385,000. However, the administrators said the final figure would depend on future costs.

In its first report, published last February, administrators estimated that A Levy owes its non-preferential creditors a total of £31.6m. They have so far received claims amounting to £19.3m.

Revenue and Customs has an open appeal against VAT charges of £9.2m.

In the 10 months to 31 October 2015, A Levy incurred a loss of £8.8m on a turnover of £81.9m. It had a book value of £38m, including stock worth £16m. Blue Inc paid £1.2m for parts of A Levy on 19 January 2016, including £800,000 for its stock.

Former Blue Inc chief executive Steven Cohen stepped down from his role last October, after 11 years. The young fashion brand promoted retail operations director Peter Girt, who has been with the firm for 10 years, to managing director.

In December, sources told Drapers that two of Blue Inc’s biggest suppliers have taken a majority share of the firm. Padma Textiles and MAF Clothing are believed to have converted £4m of their £6m loans to Blue Inc into equity, giving them between a stake of between 50% and 60%.

 

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Readers' comments (1)

  • Spare a thought here for the landlords of insolvent fashion retailers, of whom the article makes no mention.

    They are often the company’s biggest unsecured creditor, yet most of their legal rights to protect their position under the lease are taken away by the tenant’s administration.

    Administrators now have to pay rent to landlords on a pro-rata basis whilst the tenant company trades (thanks to a recent –and welcome – Supreme Court judgment), but the landlord could be left with an empty space, and a hefty rates liability, at any time.

    Tom Morton
    Fashion Law Group
    Fox Williams LLP

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