Hotter Shoes unsecured creditors unlikely to receive any dividend

The joint administrators of Skelmersdale-based Hotter Shoes say they might be able to pay secured and secondary creditors following the pre-pack sale of the business out of administration, but warned unsecured creditors might miss out.

Interpath was engaged by Hotter Shoes owner, AIM-listed Unbound Group, in May to consider options following failed takeover attempts for the business, which was founded in 1959.

Talks between Unbound and WoolOvers Group opened in March this year, but the following month Unbound said it favoured an approach from London-based investment company Marwyn Investment Management, instead.

However, in May, Marwyn withdrew its £10m fundraising offer and on July 17, Unbound announced the suspension of its shares and said it was about to appoint administrators after failing to raise funds or attract a suitable buyer.

Will Wright and James Harrison, from Interpath, were appointed joint administrators, and concluded a £6.7m pre-pack sale to WoolOvers the following day.

Their latest update on the administration process, submitted to Companies House, showed that there were two secured creditors – HSBC Bank and Lloyds Bank – when Interpath was appointed, who were owed £9.8m in total.

HMRC, as a secondary creditor, is owed £2.7m, subject to agreement.

Interpath said both secured creditors and the secondary creditor should receive a dividend, but the amount is, as yet, unclear.

However, it is uncertain whether unsecured creditors will receive any payments, and this depends on any realisations the joint administrators are able to achieve as part of the administration process.

The joint administrators said Hotter Shoes had suffered increasing cash flow pressures, as well as pressures from creditors.

Over a period of 11 weeks Interpath contacted 142 financial investors, 32 trade parties and processed 11 inbound queries, resulting in four final offers for the business.

The £6.7m pre-pack deal was concluded with WoolOvers Group, which is backed by Scandinavian private equity business Verdane.

Interpath said the sale was a better option for creditors, rather than winding up the company. The deal saved all 421 Hotter Shoes jobs.

The business adviser is now working on realising the remaining assets that were not part of the pre-pack, including cash at bank, cash in transit and an interest in an ongoing business interruption insurance claim during the COVID-19 pandemic.

So far £2.5m has been paid out in relation to the claim, and more could be recoverable, which would go towards the administration process.

Interpath said it believes the most likely exit route from the administration will be dissolution.

It revealed that, from the date of its first involvement with Hotter Shoes, in May, to July 21, the firm has incurred costs of £51,863 in time it has spent on the case.

It is estimated that this could total £602,972.75 by the end of the administration.

So far, total costs for the administration stand at £325,729.27.