From today's Drinks Business
A year ago Finance on Friday revealed that a prestigious Spanish shipper had been unable to obtain credit insurance on an order from First Quench Retailing, which back then was Britain’s largest independent group of off licences. The shipper therefore refused to supply the group.
At that stage trade rumours about the viability of FQR, which traded under the Thresher, Wine Rack, The Local, Bottoms Up, Victoria Wine and Haddows banners, were widespread. FQR had made trading losses of £28.5 million in the year to June 2007 and then ran up a deficit of £38.7m in the subsequent 12 months.
Increasingly drinks producers and their agents declined to supply and almost inevitably the company, which was ultimately owned by an investment group, Haig Luxembourg Holdco SARL, collapsed into administration in October 2009 owing an estimated £52m.
Now the company’s suppliers are facing huge losses themselves. On Wednesday (6 January), the administrators, KPMG, told a meeting of unsecured creditors, who are owed about £35m, that while secured and preferential creditors including HM Revenue and Customs and employees are likely to recover what they are owed in full, the best projection they could offer was that trade suppliers would recover no more than about 1.45 pence in the pound. Even that is dependent on the successful sale of some remaining leases held by FQR.
The largest trade creditor is Diageo, which is owed about £1.9m, £1.35m of which relates to debts to its Percy Fox subsidiary. Meanwhile Pernod Ricard is facing a deficit of £450,000; Gallo is owed nearly £400,000, and Thierry’s in the region of £600,000.
These groups will be able to absorb their losses, no matter how unwelcome, as will the international brewers such as Scottish & Newcastle/Heineken (£452,000) and Carlsberg (£293,000).
Proportionately the losses are much more traumatic for suppliers such as Hatch Mansfield, which is owed more than £800,000, Mentzendorff (£488,000), Liberty (£186,000), Berkmann (£179,000), JE Fells (more than £120,000) and Hillebrand (£133,000). Other prominent names on the list include Bibendum (£68,000) and Laurent-Perrier (also £68,000).
While the creditors list covers suppliers from all the world’s wine regions, the New World is painfully prominent on it. Debts outstanding to Brand Phoenix stand at more than £270,000 while two New Zealand specialists, Delegats, a family owned business, and Wine Export Partners, are owed £773,000 and £550,000 respectively. The list of unsecured debts runs to 19 pages of close typing but not all creditors are from the drinks trade; many local authorities are owed business rates.
KPMG said that the creditors’ meeting, to which the drinks business was refused entry, had approved the proposals to wind up FQR through a Creditors Voluntary Liquidation. There was no prospect of FQR being sold as a going concern despite a “high” level of interest from potential purchasers. More than 5,820 staff in shops and at head office have been made redundant and by Christmas 764 stores had been closed.
Christie, the licensed valuers, have been appointed to advise on marketing the remaining shop leases, the significant remaining assets of FQR, but no-one knows how long this process might take. As a result, unsecured creditors are unlikely to receive a payout in the immediate future. The position is further complicated by many drinks trade creditors filing Retention of Title claims over stock held by FQR when it failed on 29 October.
These are being examined individually; any successful actions will reduce the funds available for payment to other unsecured creditors. The next formal act will be for KPMG to report progress in six months’ time unless the administrators are able to do so earlier. The lack of timetable will add pressure to trade creditors’ balance sheets and is fuelling their anxieties, not least because some are still awaiting news of what they might receive from the administrator of Hayman Barwell Jones, which failed a year ago and was sold overnight to Coe Vintners.
Individual wholesalers and importers report a comparatively buoyant Christmas with retailers reordering strongly in the run up to the holiday. But there are fears of further failures being triggered by the VAT increase on 1 January combined with the traditionally slow pattern of trade in January and February. That might push other retailers over the edge when their accounts fall due.
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