USC administration to be investigated by the Insolvency Service

ADMINISTRATORS for USC are to come under the gaze of the Insolvency Service, which is investigating the pre-pack deal for the collapsed fashion chain.

The joint administrators from Duff & Phelps and the Gallagher Partnership are to be scrutinised on whether a pre-pack administration, where a company is sold immediately after the appointment of administrators, was appropriate for USC.

Some 200 workers at its Ayrshire-based warehouse lost their jobs, of which its 80 permanent staff were told of the programme 15 minutes after entering consultation.

Lawyers are advising 60 of them, where an employment tribunal could entitle them to eight weeks pay in compensation, if the process is found to have been handled incorrectly. More than 600 jobs were saved due to the sale.

The administrators were called into West Coast Capital (also known as USC), a controlled entity of Sports Direct. The USC stores were immediately taken on by Sports Direct division Republic, which owned another tranche of USC-branded stores.

An Insolvency Service spokeswoman said in a statement that it was “investigating the circumstances surrounding the failure of USC including whether the use of pre-pack was appropriate, as it would any other insolvency”. “Administrators of an insolvent company have a duty to submit a report on the cause of the failure to the Insolvency Service within six months. Their report is confidential,” she added.

A spokeswoman for Duff & Phelps said in a statement that a pre-pack was the best option for USC after careful consideration, citing a lack of insurance to continue selling branded products as a going concern. “…The credit insurance industry had put the company and the proposed administrators on notice that none of the branded product supplied by its insureds could be sold, making trading impossible and it was understood that a trade-on would be unlikely to increase the sale value of the business and assets due to it making a trading loss.

“Additionally, due to the business being fragmented, it was believed that open marketing efforts would not achieve an increased sale value; and it was deemed that a sale to another interested party would not achieve a better return to creditors in this instance as January is a difficult time for retail and therefore any offer received from an interested party would likely reflect this seasonality. In taking this action, all stores and staff working within them have been retained and are continuing to trade, saving approximately 616 jobs.”

The Gallagher Partnership was unavailable for comment.