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Tuesday, 29 March 2011

Officers Club in Administration

The Officers Club, the Men's clothing retailer,  has gone into administration with 46 stores being sold to Blue Inc immediately after the appointment by the administrators at Grant Thornton.  The warehouse and the remaining 56 stores have been closed.  The high street chain employed 900 people but the sale to Blue Inc has saved 400 jobs.
 
Joint administrator Joe McLean said: "The Company experienced particularly challenging trading conditions in 2010 with raw material costs rising significantly. It was not possible to pass these increases on to customers given the extremely price sensitive nature of the UK retail arena. "

The stores being bought are expected to add between £25 and £30m of sales to Blue Inc's turnover, bringing its revenues up to about £80m.

In an ideal situation the whole of the business could have been sold but it seems this was not possible. 

Have a look at our page on pre-pack administration this outlines how a company can be be put into administration and then the business and assets are sold at the same time.  An alternative would be a trading administration where the business would have been put into administration, continue to trade and then a buyer found as quickly as possible.  Alternatively, the business could be saved by going into administration and exiting via a CVA.

There must be one (or two) of three "Objectives" for the Administration:
In the application to the Court the proposed administrator must state which is his or her main objective of the following three:
  1. Company rescue, as a going concern, should be the primary objective. This usually means that the company proposes a Company Voluntary Arrangement or a scheme of arrangement.
  2. If that is not possible (or if the second objective would clearly be better for the creditors as a whole), then the administrator can achieve a better result for the creditors than would be obtained through an immediate winding-up of the company, possibly by trading on for a while and selling the business as a going concern.

    2.1. In English this means trying to sell the business for more than a liquidation would raise (see Creditors Voluntary Liquidation).
  3. Only if neither of the first two objectives is possible, can the administrator realise any property to make a distribution to secured and/or preferential creditors.

    3.1. This means collecting and selling the assets for the best price to pay the bank.

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