Author: Ben Ashworth

After months of speculation and downturn in sales performance in over the Christmas / New Year Period, computer video game retailer, GAME Group, has gone into Administration, with Mike Jervis and Stuart Maddison both of PricewaterhouseCoopers (PwC) appointed as Administrators.

It is understood that the move into Administration, will result in the immediate closure of 277 of GAME Group’s 609 stores in the UK and Ireland. It is unclear at this stage how the Group’s operations across Continental Europe (where it boasts a further 678 stores) will be affected. On the personnel side, it is anticipated that the store closures in the UK and Ireland will result in an excess of 2,000 employees being made redundant this week.

The causes of GAME Group’s move into Administration are multifaceted. As demonstrated by the geographic coverage of its operation, GAME Group had pursued an ambitious, fast paced international expansion, which in turn generated high fixed costs and stretched working capital arrangements. Poor trading over the 2011/12 period and the industry-wide factor of profits being undercut by online retailers, meant that such overheads and working capital arrangement became unsustainable. When suppliers, notably EA Sports stopped supplying its top / newest titles to GAME and with the Group’s shares being suspended on the London Stock Exchange last week, the slide into Administration became inevitable.

The Administrators are reported as wanting to sell GAME as a going concern, believing the business to retain value and on the basis that despite the seeming exodus to online retailing, “there is room for a specialist game retailer in the territories in which [GAME] operates,” (Matt Jervis). Private Equity House, OpCapita, has been touted as a possible buyer. The Landlords of those GAME stores that will remain open however will need to be wary, as recent administrations in the retail sector, have lead to widespread concerns over aggressive negotiating tactics from buyers seeking rent free periods and rent reductions.

Ben Ashworth is a Commercial Dispute Resolution Solicitor specialising in Debt Recovery.

Author: Ben Ashworth

For 12,000 holiday makers travelling with Holidays 4 U, the summer get-away has became a nightmare.
Holidays 4 U (also trading as Aegean Flights), that had specialised in selling packages and flights to Turkey, has been placed into administration.
Holidays 4 U employed 18 staff, all of whom will now be made redundant in the course of the administration. As for the holiday makers, the Civil Aviation Authority (CAA) will (as in a now all too established operation) be responsible for returning passengers who had booked flights as part of a package holiday with Holidays 4 U. Those passengers, together with those who have booked to travel with Holidays 4 U in the future, can also apply to be reimbursed out of  CAA’s Air Travel Organisers’ Licensing Scheme (“ATOL”).
Following on from the collapse of Dream Holidays just last month, the loss of Holidays 4 U underlines the fragile state of the package holiday industry, which has very much become a headline victim to the lack of consumer spending and confidence in the UK economy.
In recent times, Holidays 4 U boasted an annual turnover of £35million. The fact that it has entered into administration from that position of strength, can only add to the concerns of all package tour operators that in the current economic climate, no-one is safe.

Author: Chris Alexander

You may have recently read my blog articles about the JJB Sports PLC’s Company Voluntary Arrangement (“CVA”) which was approved on 22 March.  If you haven’t then you can read my most recent blog article here.

JJB persuaded its creditors and shareholders that it was better to lose 75% of what they were owed in a CVA rather than the predicted 99% in an administration.  Oddbins were treading a similar path, advised by Deloitte.  Its proposal meant creditors would recover 21p in the pound over 46 months but it has been reported that HMRC vetoed the CVA after 10 days of talks, meaning that only 68% of creditors were in favour, 7 percent below the required 75% threshold.  HMRC is believed to have been owed in the region of £8 million but the predictions in the press are that the return from the administration will be only 5-7p in the pound at best.

Oddbins now joins Unwins and First Quench (Threshers and Wine Rack) as victims of the recession and the squeeze on margins brought about by competition from the supermarkets.

Mind you, it’s not all bad news for Deloitte, even though the CVA it drew up failed, it is due to be appointed on Oddbin’s subsequent Administration.  With no pre-pack it will be a bumper few months of fees for the administrator.  One of the first things the Administrator will want to investigate is why Oddbins is owed £17 million by a company controlled by former directors!

Author: Chris Alexander

I have written several blog articles recently about troubled retailer JJB Sports PLC and its attempts to rescue itself through a second Company Voluntary Arrangement (“CVA”) in two years.  As you may have read in the trade or national press, JJB with the able help of retail CVA specialists KPMG (on the basis that they pioneered the first JJB CVA!), persuaded creditors to accept the proposal on 22 March 2011.

What is a CVA?

A CVA is basically a compromise with creditors made under provisions of the Insolvency Act 1986 and is a way for a company to negotiate a deal which protects it and avoids a liquidation or administration.  The arrangement will be binding on creditors if approved by relevant majorities of creditors and shareholders.  A CVA does not prejudice the rights of secured/preferential creditors unless they agree to the proposals.  The balance for the insolvency practitioner designing the CVA to strike is ensuring that the likely return for creditors/shareholders from the CVA is sufficiently better than the likely return for them in the event of administration/liquidation.

How did we get here?

It seems that the first CVA in 2009 either failed to provide JJB with a sufficiently sustainable platform to trade profitably or trading conditions turned out to be even more difficult than predicted.  A conspiracy theorist may say that this second CVA was always part of an elaborate strategy to force creditors/shareholders to accept an even less palatable proposal than they would ever have agreed to back in 2009 (and who knows, there may be another one planned in two years time).

It was widely reported that the latest JJB CVA proposal was likely to deliver 25p in the pound to creditors against a predicted 1p in the pound from administration.  One thing that is often overlooked is that a large chunk of the 24p difference would be swallowed up by the fees of the insolvency practitioner, so for them the situation is a win/win.  JJB also had the strategic advantage of one of the major creditors being a wholly owned subsidiary. This did lower the effective creditor approval threshold substantially.

Is this the end?

Faced with a choice between nothing and something, the commercially rational creditor is likely to pick the latter in most cases.  For that reason, even after the store closures and payments of between £2.5 and £7.5 million to landlords from this deal, there is no guarantee that JJB won’t be coming back cap in hand to creditors again if the second CVA has not achieved the desired result.  However, the cumulative effect of the preceding two CVAs may make that rational decision somewhat more difficult to make, especially if the promised payments to landlords fail to materialize.