Phones4U secured creditors to get up to 24p in the £1, says PwC

Close to £170m owed to unsecured creditors in collapsed mobile phone retailer Phones4U will be almost entirely wiped out, according to the first progress report into the group's demise by administrator PwC.

Unsecured creditors to the retail chain are owed about £168m but are only likely to receive 0.4p for every pound, PwC said. These include HM Revenue & Customs, which is owed about £75m in VAT and corporation tax.

However, creditors who own Phones4U's £430m worth of senior secured notes, which are listed on the Irish stock exchange, "may recover" 20 per cent to 24 per cent of their money, as their debt ranks higher up the legal ladder for repayment priority in an insolvency.

Phones4U was the largest retail failure on Britain's high street since the demise of Comet in 2012. It collapsed into administration after EE and Vodafone decided to stop selling phone contracts through the chain in September last year.

The move caused an argument over whether they were to blame for the group's demise or if the private equity owners of the chain were responsible.

Founder John Caudwell, who sold the business for £1.5bn in 2006 to Providence Equity Partners and Doughty Hanson, waded into a bitter war of words with accusations of foul play by the operators.

However, people at the mobile groups blamed BC Partners for loading the business with debt to pay dividends. In September 2013, BC Partners issued £200m of payment-in-kind notes - a means of high interest debt financing - for Phones4U to fund a one-off special dividend.

The Phones4U group has seven companies in total, including an insurance business and mobile services provider. EE, the mobile group, has already been forced to write off £336m owed by Phones4U.

PwC said that Quinn Emmanuel Urquhart & Sullivan, the law firm, has completed an initial investigation on the conduct of the management before the administration. PwC declined to provide further details but said it was considering the findings and the next steps.

The tabular content relating to this article is not available to view. Apologies in advance for the inconvenience caused.

Landlords would have the right to pursue the administrator for unpaid rent, although they would be ranked among the unsecured creditors that will receive next to nothing.

PwC said it had raised about £27m from stock sales, mostly from the sale of Apple handsets.

More than 3,000 former employees have been made redundant but will be due to receive wages up to £800 plus holiday pay and pension contributions. About 2,000 jobs were saved when parts of the business were sold to rivals.

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation