B of I says it will recover all its debts from chain

The administrators intend to continue to trade Zavvi UK with a view to selling all or part of it as a going concern.
The administrators intend to continue to trade Zavvi UK with a view to selling all or part of it as a going concern.
Photograph: Eric Luke

COLM KEENA Public Affairs CorrespondentBANK OF Ireland has said it expects to recover all of its debts from Woolworths, the UK retail chain expected to close all of its outlets in the coming week.

Burdale, a UK-based subsidiary of the bank, loaned £385 million (€396 million) to Woolworths in January. However, a spokesman for the bank said the debt had been substantially repaid to Burdale and it expected to recover all of its money.

Woolworths is expected to close all of its stores – about 800 outlets – between now and January 5th with the loss of some 27,000 jobs.

Burdale is an asset-based lending business and its loans to Woolworths are collateralised against the non-property assets of the group. As Woolworths stock is sold, Burdale expects to recover the remainder of its debt.

Burdale was founded in 1992 and became part of the Bank of Ireland group in 2005. It is based in London and operates in the US as well as the UK and Ireland.

UK-based retailer Adams Childrenswear, which has outlets around the Republic, is expected to go into administration shortly as a result of pressure from creditors that include Burdale. Burdale advanced £10 million to Adams, which is owned by Northern Ireland businessman John Shannon.

Mr Shannon, who is reported to be owed £20 million by the group, brought the retailer out of administration last year. It has more than 300 outlets including 31 in the Republic and 12 in the North.

Calls to the Adams headquarters in England yesterday went unanswered. The spokesman for the Bank of Ireland said that again the bank expected to recover all its funds. The spokesman said that, contrary to some reports, Burdale does not have a direct exposure to Zavvi, a retail group that placed its UK operating companies in administration on Christmas Eve.

The group, formerly Virgin Megastores, has more than 120 outlets in the UK and was the subject of a reportedly £1 management buyout last year. Its 11 outlets in the Republic are not affected by the appointment of the administrator.

“At this time Zavvi Ireland is not subject to any formal insolvency proceedings,” a spokeswoman said. The outlets in the Republic employ 201 permanent staff and 95 temporary staff.

Zavvi appointed administrators from Ernst Young on Christmas Eve to the companies running its 125 UK stores where 2,363 permanent staff are employed and 1,052 temporary staff.

In a statement the group said that on November 27th “Entertainment UK Limited (EUK), the group’s main supplier, went into administration. Since this time the group has been unable to source stock in the usual way and has been forced to enter into new trading arrangements.

“The directors understand it is unlikely that EUK will be sold as a going concern and the Zavvi group has continued to experience significant difficulty in obtaining stock on favourable credit terms. This has resulted in considerable working capital difficulties as a result of the failure of EUK, in addition to continuing operating losses.”

The administrators intend to continue to trade Zavvi UK with a view to selling all or part of its business as a going concern.

http://www.irishtimes.com/newspaper/finance/2008/1230/1230581468560.html

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