Nightmare for Dreams as insurer pulls cover despite refinancing

BED retailer Dreams has been hit with a vote of no confidence from the insurer of its suppliers, which suspended its cover of about a fifth of Dreams’ suppliers last week.

Euler Hermes, which insures suppliers against their customers going bankrupt, put Dreams’ suppliers on notice that its cover would end in 30 days, leaving them at risk of loss if the bed specialist failed to pay them.

The move comes despite accounts from Dreams showing it received £20m of fresh capital and secured “improved terms for its banking facilities” from its private equity owner Exponent in May.

The accounts filed at Companies House also showed Dreams remained profitable in the year to 24 December 2010, turning almost a £5m profit, although this was down from £15.3m in the previous year.

Withdrawal of credit insurance is seen as a sign a company is in distress, and Euler Hermes has come under fire in recent years for withdrawing cover from firms struggling to survive.

Its refusal to cover Woolworths contributed to that company’s collapse, while since 2008 it is said to have stopped its cover of Borders, TJ Hughes, HMV, Gala Bingo, Topps Tiles and steelmaker Corus.