My 2009 prediction- The year of the Phoenix!
Among the many things that can be foreseen about the economic climate in the UK next year, I predict a real upsurge in the use of pre pack administrations in the retail sector. The use of this administration tool has been growing steadily since the introduction of the Enterprise Act of 2002 , but its only in the last few months that things have really taken off. Critics, particularly unsecured creditors, say that this tool allows a troubled company to line up a very easy sale of a company’s assets back to the same owners, leaving debts unpaid- another name for a “phoenix” company.
In the retail sector, the tool also gives financially weak companies the chance to side step onerous lease obligations on some retail sites, whilst allowing them the chance to continue trading in the remaining profitable locations.
Consumers, worried about the changing face of the high street through the loss of Woolies etc may welcome the growing use of pre packs, as to the outside world, failed retailers will look as though they continue to trade with the same stock and employees intact.
Unsecured creditors and credit insurers will no doubt hold an entirely different view.