Allders goes into administration

DEPARTMENT stores group Allders has gone into administration after bankers for the company failed to find a new buyer in time to stave off its growing financial problems.

Sources close to the company said that consultants Kroll were appointed this afternoon as administrators. The move casts a dark shadow over the company's 7,500-strong workforce and the future of its £60m pension scheme.

Today's appointment of administrators was not totally unexpected. Retail turnaround specialist Hilco last week took on £90m of debt in Allders from investment bank Lehman Brothers, a 20% shareholder in Scarlett Retail, Allders' parent since 2003. The investment gave Hilco effective control over the company, which operates 45 branches, many in the south-east of the country but there were doubts as to whether agreement between the relevant parties could be reached in time.

Allders was founded as a family business by Joshua Allders in Croydon in 1862 and floated on the London stock market in 1993. The company has become a victim of its own fast expansion and struggled to keep up sales momentum. The saga surrounding Allders has dragged on since last July when property company Minerva, one of three partners in Scarlett Retail with Lehman Brothers and former Debenhams boss Terry Green, revealed it had received a bid approach.

Minerva and Lehman disclosed in December that they had received expressions of interest in Allders from several parties, including one from its management team. And earlier this month, Minerva said partner Lehman had transferred all its debts and commitments in the Allders Group to Epsilon Investments, a consortium of investors headed by Hilco UK, raising questions about the future of the group.

Although some retailers are likely to be interested in some of Allders' attractive town-centre sites, sources close to the process have questioned whether any of the potential suitors would be able to raise the funding needed to buy out the troubled department store chain. Allders' debt is now split with Barclays, the main creditor, owed some £50m, and Minerva holding £10m. The balance lies with Hilco.

Several listed companies could face a financial hit from Allders' difficulties. Five listed companies are exposed as either suppliers or concessionaires, including Actif Group, French Connection, Ted Baker, Alexon, Carpetright and Jacques Vert.

Richard Ratner, analyst at Seymour Pierce, said that concessionaires will fare no better than the unsecured creditors with the company in administration. Ratner estimates Alexon's exposure at £2m-£2.5m, Carpetright's at £2m and Jacques Vert's at about £700,000. Ratner says the hit will be one off if Allders is sold out of administration as a going concern, but said Alexon would be the worst affected if not, as it derives an estimated £35m-£40m of sales out of Allders.