Tie Rack creditors are set to receive less than 1% of nearly £115.7m owed following an agreement that will see the retailer’s three trading companies enter a Company Voluntary Arrangement (CVA).
Approval for the CVA for Tie Rack, Tie Rack Trading and Tie Rack Retail Group was reached on January 2, and comes after a wider restructuring that will see the business’s stablemate Rolling Luggage continue trading.
It follows the acquisition of a 62.5% stake in the business in September by newly incorporated company Trakice, which later claimed “the level of creditor arrears was significantly worse than had been indicated” when it was bought, and with a net loss of £1.6m the business was no longer viable.
Subsequently, Trakice and longstanding owner The Fingen Group began closing Tie Rack’s 44 stores in November, affecting around 200 staff.
According to documents put forward by Tie Rack’s representative Begbies Traynor, creditors stand to receive as little as 0.06p and as much as 83p for every £1 owed. This marked a better deal than if the business were liquidated, when they would receive nothing, Begbies Traynor said.
However, aggrieved creditors have contacted Drapers, claiming they had received assurances for many months prior to Tie Rack being wound down that back payments would be met.
Sulabh Chhabra, chief executive of Indian supplier Paras Exports, spoke on behalf of a group of suppliers who are owed nearly £500,000 in total.
He said: “We are just small companies and some are having to close down, or think seriously about their future. People are suffering – and there are so many unanswered questions.”
The collective plans to challenge the CVA within the 28-day review period. “Right now we are just looking at what will be the next steps for us,” Chhabra said.
Tie Rack did not respond to requests for comment. However, a Begbies Traynor spokeswoman said proposals had been approved by 90% of creditors by value, exceeding the 75% threshold.
She added: “The CVA provided an alternative to these companies entering administration or liquidation and is expected to provide unsecured creditors with a return about 30% greater than that achievable through liquidation. As a result of the CVA, a portion of the business of Tie Rack Limited and Tie Rack Trading Limited has been preserved, allowing the ongoing employment of a significant number of staff.”
In its most recent financial results for the year to January 31, 2012, Tie Rack’s turnover was £68.1m, with a pre-tax loss of £6.8m.