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USC suppliers can expect 3p in the pound

USC’s unsecured creditors are likely to receive “3p or 4p” in the pound of the £15.2m unsecured debt owed following its fall into administration in January.

Speaking at a Scottish Affairs Committee hearing on March 25, Philip Duffy of USC’s administrator Duff & Phelps said suppliers are likely to get 1.3% of the money owed.

“It’s early to say,” he told MPs. “We estimate about £200,000 will be distributed among unsecured creditors. So it is still 3p or 4p in the pound.”

Duffy said the £15.2m owed is likely to reduce as Republic, another Sports Direct chain, which bought USC on January 13 through a pre-pack administration, will settle retention of title claims with brands.

As previously reported by Drapers, USC’s brands are owed £14.3m, HM Revenue & Customs is owed £576,499 and gift vouchers issued by the firm total £286,333. Brands hit hardest include Diesel, which was owed £1.3m at the time it pulled out of USC in October.

Sports Direct chairman Keith Hellawell told the committee Diesel held the retailer “to ransom” by calling in its debt.

However, Jonny Hewlett, UK managing director of Diesel, told Drapers the brand gave plenty of notice to USC and agreed to honour all outstanding commitments until June this year. Diesel has since recovered all of its debt from Sports Direct.

Hewlett said: “Following the pre-pack, we met with directors at Sports Direct and through three months of longwinded discussions we are back to where we started: honouring our commitments and recouping our debt.”

The sportswear business also came under fire from MPs at the hearing when it revealed that almost 15,000 of its UK employees, or 75% of its workforce, are on zero-hours contracts.

Only 4,300 members of its 19,000-strong payroll are on permanent contracts. The permanent staff qualify for bonus scheme payouts, while those on zero-hours contracts are not included in the scheme – regardless of how long they have worked at the company or how many hours they work a week.

Hellawell told the committee the approach offers flexibility for its largely young workforce, some of whom are university students, and allows the firm to meet demand.

He said moving away from zero-hours contracts, should the law change, would hit the business’s bottom line, adding: “It would adversely affect the way we run the business.”

@jillgeoghegan

Readers' comments (6)

  • An absolute disgrace. You get rewarded for running a business very badly. There is no level playing field at all in Clothing Retail.

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  • It sounds like this business has been run into the ground for a while and that Diesel were just smart enough to realize that USC really should not be trading anymore.

    Is there a case here where the directors should have stopped trading earlier and are liable for not taking directors responsibility and stop trading when it became clear the business was in fact insolvent?

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  • Is there a case here to show that terms demanded by large retailers are just too risky? In France for instance it is now illegal for any business to demand terms over 60 days. That is in place to protect suppliers (many of whom are much smaller than the companies demanding longer terms) from situations like these and keeps everyone's cashflow in a reasonable shape. Overall much healthier.

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  • 75% of workforce on zero hours?

    In a 4 man startup this would be understandable, but not in a business of this scale.

    Surely once your business gets to a certain size there should be a maximum % or at least some additional entitlement for employees to at least be acknowledged for their performance.

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  • Interesting point Ben Muis-I would like to see the politicians put that in their manifestos-If they really care about SMEs-which I'm quite sure they don't

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  • The new Govt could change on the law on zero hours but employers will find a way around it just as Asos warehouse does by only employing temp workers (mainly from EE) and replacing them after 11 weeks (as after 12 weeks they have to be offered a perm contract. I think it was Dispatches programme that ran the story......Drapers did not report on it.(as would be expected.)

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