Farepak customers to get 5p in the pound

People who saved for Christmas through collapsed savings business Farepak
will only get 5p in the pound, according to administrators from
BDO
Stoy Hayward .

In its report to creditors, available on
Farepak’s
website , administrators said that ‘it is clear that Farepak did
not protect the money paid in by agents and customers’.
Farepak lent its parent company EHR £33m that was not repaid, leaving Farepak
customers without supply vouchers, hampers and gifts for Christmas.

The amount owed to Farepak customers and unsecured creditors is around £46m.

Only employees are secured creditors of the company, who are owed £16,000.

The report revealed that as of 31 December administrators had accrued
£400,000 in fees, working around 2,000 hours at £199 per hour. The firm said it
would write off £100,000 of the cost relating to work helping ministers and
others on the case.

It is for creditors, or a creditors’ committee, to decide if administrators
are paid on time spent dealing with the case or as a percentage of the assets.

They have also recommended that the company is put into liquidation. This
will enable a return to creditors without going through the courts.

Current joint administrator Shagun Dubey would be joined by another BDO
partner, Dermot Power, if BDO was chosen as liquidator.

Administrators hinted that further investigation and court proceedings could
ensue if the company was placed into liquidation: ‘…any liquidator has wider
powers than an administrator to take legal action against third parties if this
is appropriate. Such legal action could lead to further funds being realised for
the benefit of the creditors. These are some of the reasons I would recommend
that Farepak be placed into liquidation,’ said joint administrator Martha
Thompson.

Further reading:

Farepak
parent company owes £80,000 to directors

BDO
and DTI to investigate Farepak collapse

Farepak
loans ‘nothing to do with audit’