Jane Norman pre-pack deal sparks a row
ADMINISTRATORS to struggling retailer Jane Norman yesterday sold off 33 stores in a controversial pre-pack administration that has refueled the debate into this route for insolvent companies.
Edinburgh Woollen Mills, which was lined up as a buyer by PwC before the company was handed over to its administrators Zolfo Cooper, has agreed to buy a third of Jane Norman’s stores and all of its stock.
The rise of pre-pack deals, whereby assets are sold off debt free ahead of a formal administration, is likely to cause unease with certain groups of creditors who feel they are being disadvantaged in the process.
Government minister Ed Davey is said to be considering changing the law to bring in a three day cooling off period, during which time unsecured creditors would be able to object to a pre-pack arrangement.
However, sources say the proposal has so far spurred a hostile reaction from the insolvency profession.
According to Michael Rutstein, a restructuring partner at law firm Jones Day, a pre-pack is the best option for creditors: “In most cases, the system is not abused and the best result for creditors is achieved.”
Habitat and Homeform are also said to be entering pre-pack administration.