Halliwells administrators dash creditors’ hopes

21 February 2011 | By Luke McLeod-Roberts

A September 2010 letter from the firm’s joint administrators, BDO partners Dermot Power and Shay Bannon, detailed £14.1m owed to unsecured creditors. They included florists, stationers, chauffeur ­companies, charity St John Ambulance and a sandwich bar from which the firm ordered thousands of pounds worth of food up until the day it folded.

But the scale of the debts listed in the latest administrators’ letter to all known creditors, dated 11 February, suggests that, while the administrators are seeking to recover money from sources as diverse as the sale of company cars to that of Wembley corporate hospitality tickets, the likelihood that small business creditors will ever get paid looks even more remote than ever.

The document, which was leaked to The Lawyer, shows that the administrators have received unsecured claims totalling £192m, or around three times the turnover of Halliwells in its final full year of trading.

“The amount sounds like quite a lot,” comments Tony Williams of consultancy Jomati, “but I think you should take it with quite a big pinch of salt because the landlords are putting in claims for the entire remainder of the leases.”

At the time the firm went into administration in July 2010 it held leases on ­properties in Liverpool, Manchester, Sheffield and London. Just a few months previously it had taken on further space and extended its lease in Liverpool until 2031, while the lease on its headquarters at Spinningfields has 21 years left to run. In November 2010 some of the landlord and lease creditors joined HM Revenue & Customs (HMRC) and RBS, the only secured creditor, on a creditors’ committee.

The landlord members comprise a German fund run by Credit Suisse Asset Management, which owns the firm’s former headquarters at Spinningfields, ING Lease UK and Bruntwood 2000 Beta Portfolio, which owns the ­Liverpool office.

Observers have questioned why these companies do not seek to let the empty properties immediately. However, Williams argues that the likelihood that the Manchester office will be let again at the rate Halliwells signed up for, which was around £35 per square foot, is slim, given that the price was negotiated at the top of the market and is above ­current market rates.

“The landlord won’t want to [take responsibility] for the lease until a new tenant’s lined up,” he says. Nor will they want to pay empty rates for the unoccupied space.

Freshfields Bruckhaus Deringer restructuring partner Richard Tett explains that the administrators do not have the power to ­disclaim the lease. “Only the liquidators can do that,” he adds. “The disclaimer terminates the contract and turns it into a damages claim.”

The administration process has cost around £8m so far, including two payments for legal fees that together total £983,000. CMS Cameron McKenna, which has been advising BDO, declined to comment.
The letter also states that a total of 149 members of staff lost their jobs, accounting for 20 per cent of all ­employees. At least one member of staff is pursuing legal action over how this process was handled.

Meanwhile, the owner of the sandwich shop that lost around £6,500, Daljit Randhawa, tells The Lawyer that the unpaid bills were the last straw in a tough ­economic situation that led him to lay off the same ­proportion of his staff as went at Halliwells (one out of a total of five).

“I’ve done it in order to keep going, to survive,” he says. “We’re the real losers in all this - the small boys.”