Retail insolvencies start the year
With both Greeting Card Group and Music Zone going into administration this week (reported in Financial Director), are we seeing a retail-led continuation of the last quarter's surge in UK corporate insolvency rates?
It's hardly surprising to see retail administrations at this time of year - over-leveraged and under-performing retailers have minimum borrowings after the Christmas sales peak and secured creditors will naturally choose that point to stop the losses.
Retail has been a risky sector for some while, and although some brands are reporting a strong Christmas season, the continuing consumer debt problem (£1.3 trillion total and over 100,000 personal insolvencies in 2006) cannot help.
But constructive use of formal insolvency - such as the pre-pack administration used to rescue Little Chef this week - can often add value when a business is saleable and the right restructuring team is brought in early enough.
