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Clinton Cards to go into administration Clinton Cards goes into administration
(about 3 hours later)
More than 8,000 Clinton Cards staff face a nervous wait after its biggest supplier said it planned to push the British retail chain into administration. More than 8,000 jobs at Clinton Cards were on the line after the group became the latest casualty of the high street spending slump.
The aggressive move by American Greetings (AG) wrong-footed Clinton 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 are now off after AG took action on Tuesday night, buying up Clinton's £35m debts from Barclays and taxpayer-backed Royal Bank of Scotland and then calling in the loans. Earlier its biggest supplier had said it planned to push the British retail chain into administration.
Nick Hood, the restructuring expert who runs analyst group Company Watch, told the BBC this was a popular tactic 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 aggressive move by American Greetings (AG) wrongfooted Clinton's 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 AG took action on Tuesday night, buying up Clinton's £35m debts from Barclays and taxpayer-backed Royal Bank of Scotland and then calling in the loans.
Nick Hood, the restructuring expert who runs analyst group Company Watch, told the BBC this was a popular tactic in the US called "loan to own". "This is a very American way of doing insolvency," he said. "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," said Hood.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," said Hood.
Whereas the banks had waived certain conditions on the loans, AG has said it will push the company into administration. The Ohio-based company, which has annual sales of $1.6bn (£990m) and manufactures cards under brands such as Carlton Cards, is expected to make a statement later on Wednesday.Whereas the banks had waived certain conditions on the loans, AG has said it will push the company into administration. The Ohio-based company, which has annual sales of $1.6bn (£990m) and manufactures cards under brands such as Carlton Cards, is expected to make a statement later on Wednesday.
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. Clinton Cards, which operates 628 Clinton and 139 Birthdays stores, earlier 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.
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 the shops are ultimately expected to close.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 the shops are ultimately expected to close.
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.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.
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.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.
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%. Willson-Rymer has been working on a 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%.
Clinton said that it was not in breach of any financial covenant or repayment obligation, but that the banks had waived "technical breaches of default" related to management changes and supplier-related discussions. It had believed that AG would have extended that support if it bought the loans, and had been caught off guard by the decision the US company made.Clinton said that it was not in breach of any financial covenant or repayment obligation, but that the banks had waived "technical breaches of default" related to management changes and supplier-related discussions. It had believed that AG would have extended that support if it bought the loans, and had been caught off guard by the decision the US company made.
The crisis is a dark day for founder Don Lewin, who started the retailer in 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 crisis is a dark day for founder Don Lewin, who started the retailer in 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.