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Details Emerge of Retailer Blue Inc’s Controversial Pre-pack Administration

Details Emerge of Retailer Blue Inc’s Controversial Pre-pack Administration

Reviewed: 17th February 2016

Blue Inc's left out of pocket It has emerged that several of Blue Inc’s creditors could be left out of pocket after the men’s fashion retail company carried out a pre-pack administration process.

The company has been struggling to stay afloat in recent months and used a pre-pack procedure to essentially offload 76 of its worst performing stores.

The administration process enabled Blue Inc’s owners to shed much of its debt burden, with the more profitable parts of the business subsequently acquired out of administration by its former directors.

Although the insolvency procedure has helped Blue Inc to improve its prospects as a retail business in the UK, the pre-pack deal has proven controversial because HMRC and several of the company’s suppliers have been left with their debts as yet unpaid.

According to the Guardian, reports were filed recently which show that Blue Inc’s directors paid just £1.2 million to acquire 160 retail outlets via their pre-pack administration deal.

Administrators in the case have insisted that they marketed the business to a number of different parties but found that the offer made by Blue Inc’s former owners was the best available.

Reports from the administrators indicate that A Levy & Son, the subsidiary that owned Blue Inc’s UK stores, owed millions of pounds to dozens of small businesses, as well as to more sizable clothing manufacturers and landlords, as it entered administration.

The pre-pack deal is understood to have included an agreement for creditors to be paid back 50 pence for every 80 pence they’re owed by Blue Inc.

However, the Guardian’s sources have said that it is less clear what steps will be taken by the business’ new parent company to address the money owed to HMRC.

Reflecting on its performance in recent months, Blue Inc’s administrators said: “Despite the company’s substantial growth it faced difficult competitive trading conditions with many competitors in the sector becoming insolvent or restructuring their businesses, leading to rival businesses gaining a competitive advantage over the company.

“The failure of competitors in the company’s sector also made trade insurance more difficult to obtain and resulted in many suppliers reducing or even withdrawing credit terms. This has caused strain on the company’s cash-flow requirements.”

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