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Clinton Cards to go into administration Clinton Cards to go into administration
(about 2 hours later)
Embattled retailer Clinton Cards is set to lose its fight for survival after its largest supplier said it will force it into administration later on Wednesday. More than 8,000 Clinton Cards staff face a nervous wait after its biggest supplier said it planned to push it into administration.
The retailer, which operates 628 Clintons and 139 Birthdays stores, has requested that its shares be suspended on the London Stock Exchange. The aggressive move by American Greetings (AG) wrong-footed chief executive Darcy Willson-Rymer who had hoped to work closely with the New York-listed group as part of a turnaround of the loss-making retailer. But all bets were off after AG swooped on Tuesday night, buying up Clinton's £35m debts from Barclays and taxpayer-backed Royal Bank of Scotland and then calling in the loans.
The move comes after its banks – Barclays and taxpayer-backed Royal Bank of Scotland – sold the company's £35m of loans to its biggest supplier, American Greetings. Nick Hood, the restructuring expert who runs Company Watch, told the BBC it is a popular tactic used in the US called "loan to own": "This is a very American way of doing insolvency – you buy the loans as a way of taking control of the company." The move puts AG in pole position ahead of any restructuring. Unlike banks, suppliers are unsecured creditors and usually lose out when a company goes under. "AG may not get all their money back this way but they will get a lot more back than if they had not employed this strategy," added Hood.
But whereas the banks had waived certain loan conditions, American Greetings has said it will push the company into administration. Whereas the banks had waived certain loan conditions, AG has said it will push the company into administration. The Ohio-based company, which has annual sales of $1.6bn (£99m) and manufactures cards under brands such as American Greetings and Carlton Cards, is expected to make a statement later on Wednesday.
Clintons is the UK's biggest card retailer and employs more than 8,000 staff. Clinton Cards, which operates 628 Clinton and 139 Birthdays stores, has requested that its shares be suspended on the London Stock Exchange. It is the country's biggest card retailer and according to its website has 8,350 employees, mostly working in store, many on a part-time basis.
It is understood that administrators would continue to run the stores as normal while seeking a buyer for the business, but a large number of stores could be closed. Staff have been told to turn up for work and it is thought the administrators will continue to run the stores as normal while seeking a buyer – although a substantial number of shops are ultimately expected to close.
Its fall into administration would be another blow to the high street after recent high-profile casualties, including video games retailer Game Group, fashion chain Peacocks and outdoor specialist Blacks Leisure. Clinton's problems are another blow to the high street following recent high-profile casualties, including video games retailer Game, fashion chain Peacocks and outdoor specialist Blacks Leisure.
Clintons has suffered dire trading in recent months as it comes up against stiff competition from supermarkets and online retailers such as Funky Pigeon and Moonpig, which sell personalised cards. Clinton has suffered dire trading in recent months as it comes up against stiff competition from supermarkets and online retailers such as Funky Pigeon and Moonpig, which sell personalised cards. It made a pre-tax loss of £3.7m in the 26 weeks to 29 January, compared with a profit of £11.7m in the previous year, and warned that the second half of the year would be below expectations.
It recorded a pre-tax loss of £3.7m in the 26 weeks to 29 January, compared with a profit of £11.7m in the previous year, and warned that the second half of the year would be below expectations. Its shares have lost more than 80% of their value since the start of 2010. Willson-Rymer has been working on strategic review for six months, which is understood to have included a fruitless search for a buyer for all of the business or its Birthdays chain. Clinton revealed more poor trading for the 14 weeks since 29 January, with same-store sales down 3.5%.
It revealed more poor trading for the 14 weeks since 29 January, with same-store sales down 3.5%. Clinton said it was not in breach of any financial covenant or repayment obligation but the banks had waived "technical breaches of default" related to management changes and supplier-related discussions. It had believed that American Greetings would extend that support if it bought the loans and was caught of guard by the path it has chosen.
The chief executive, Darcy Willson-Rymer, has been carrying out a strategic review over the past six months, which is understood to have included a fruitless search for a buyer for all of the business or its Birthdays chain. The crisis is a dark day for founder Don Lewin who started the retailer 1968 from a shop in Epping, Essex. In 1988 it had 77 stores when it floated on the stock market. Its store numbers were swelled by numerous acquisitions including Hallmark Cards and the ill fated Birthdays Group, which had 170 stores, in 2004.
The group said it was not in breach of any financial covenant or repayment obligation but the banks had waived "technical breaches of default" related to management changes and supplier-related discussions.
It had believed that American Greetings would extend that support if it bought the loans, but instead it was told that the conditions would be enforced.
The chain was founded in 1968 when Don Lewin opened the first store in Epping, Essex.
In 1988 it had 77 stores when it floated on the stock market. Its store numbers were swelled by numerous acquisitions including Hallmark Cards and the Birthdays Group, which had 170 stores, in 2004.