BusinessBusiness RecoveryEditorial: Zombie problem is the key insolvency issue

Editorial: Zombie problem is the key insolvency issue

Blacks' collapse into 2nd insolvency procedure raises questions about creating 'Zombie Businesses'

SO BLACKS HAS ENTERED into its second restructuring process in two years.

The high street retailer, famous for its Blacks Leisure and Millets brands, will be sold on through a pre-packaged administration – with shareholders losing their investments.

KPMG, watching over the process, managed Blacks’ company voluntary arrangement (CVA) process back in 2009. A CVA keep the business alive but reduces debts, with insolvency practitioners creating and managing a repayment plan to creditors.

The firm has also overseen two CVAs for fellow high street brand JJB Sports.

The first JJB CVA back in 2009 was lauded for its innovative structure, stores paying monthly rents rather than quarterly, while attempting to pay off landlords of unwanted stores.

While JJB limps along, Blacks creditors and shareholders are set to lose out.

Tough questions have to be asked about the use of CVAs, and more generally whether insolvency processes have been used to prop up dead, or ‘zombie’, businesses.

On occasion this would undoubtedly be the case.

But what would be the alternative for Blacks, and JJB for that matter, if they’d just collapsed and broken up?

Thousands of job losses and out-of-pocket creditors would be the upshot.
Making a call on whether the wrong restructuring strategies have been used is a tough call.

But there are thousands of employees and suppliers to big companies that might find it tough working with a struggling business – but it’s better than no business at all.

Related Articles

EY hired by Carillion to review finances

Accounting Firms EY hired by Carillion to review finances

4m Alia Shoaib, Reporter
Over 800 jobs saved as Endless LLP acquires Jones Bootmaker

Business Recovery Over 800 jobs saved as Endless LLP acquires Jones Bootmaker

8m Emma Smith, Managing Editor
SFP sells off Pixel Projects and saves all staff

Business Recovery SFP sells off Pixel Projects and saves all staff

1y Stephanie Wix, Writer
Cowgill Holloway concludes sale of film distributor Metrodome

Accounting Firms Cowgill Holloway concludes sale of film distributor Metrodome

1y Richard Crump, Writer
FRP Advisory sells Harland Machine Systems to Accraply Europe

Accounting Firms FRP Advisory sells Harland Machine Systems to Accraply Europe

1y Richard Crump, Writer
Administrators from KPMG appointed to City Motor Holdings

Business Recovery Administrators from KPMG appointed to City Motor Holdings

1y Richard Crump, Writer
Begbies Traynor appointed administrators of William Anelay

Accounting Firms Begbies Traynor appointed administrators of William Anelay

1y Richard Crump, Writer
Smith & Williamson appointed administrators of 4Children

Accounting Firms Smith & Williamson appointed administrators of 4Children

1y Richard Crump, Writer