February 3, 2009 7:30 pm

Deloitte to scrutinise Woolworths directors

Woolworths’ directors will be scrutinised by Deloitte, administrator to the collapsed chain, after a creditor questioned whether the retailer should have stopped trading earlier.

At a creditors’ meeting at Alexandra Palace in London, Neville Kahn, administrator to Woolworths, was asked by one creditor to look at whether the board of the company, led by chairman Richard North and chief executive Steve Johnson, should have pulled the plug earlier on the lossmaking business to safeguard more money for creditors.

Deloitte also flagged several areas of disagreement with the directors’ statement of affairs – which was produced when they decided to file for administration for the 800-store retail chain last November – including the exact amount owed to senior lenders.

Directors could not be reached for comment last night. They took legal advice repeatedly in the final weeks of Woolworths’ existence as a public company, as they tried to agree a rescue deal without breaching their duties to creditors.

Deloitte said on Tuesday that it would recover enough money after selling off the retailer’s assets to pay the full £333.5m owed to senior lenders. However, unsecured lenders were “highly unlikely” to receive any of the £1.1bn they were owed.

Mr Kahn and his team have sold anything they could from the collapsed store’s estate, from sweets to fixtures and fittings. About 200 leases have been sold as part of the transactions, while a 40 per cent stake in a publishing joint venture with BBC Worldwide, a books wholesaler and some remaining properties are still up for sale.

Aside from the £333.5m owed to six senior lenders led by GMAC and Burdale, Mr Kahn said he expected to be able to pay back at least part of the £100.4m owed to creditors further down the list – second lien-lenders, which are ADM Capital and Davidson Kempner Capital Management, the distressed debt investors, and the Woolworths pension fund.

Woolworths was forecast to make a £50m loss in the year to January 31 2009, but its lenders failed to agree a financing plan with directors to take the struggling company into the new year.

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