City Link collapse leaked to media ahead of administration
NEWS of the impending administration of Coventry-based parcels delivery group City Link was leaked to the media ahead of an official announcement, it owners said in a statement today.
News of the group’s administration broke on Christmas Day, along with fears for the future of its 2,700 workforce. Reports have suggested around 2,000 of the workers could be made redundant as early as New Year’s Eve.
The board of Better Capital PCC said it very much regretted the impact the news had had on staff, especially the timing of the news. The company also revealed it had tried to sell the City Link business prior to administration.
In a statement to the London Stock Exchange today – the first available opportunity to do so since markets closed on Christmas Eve – Better Capital said it had been advised by BECAP12 GP Ltd that City Link group, an investment within BECAP12 Fund LP, had been placed into administration.
“Unfortunately the appointment of an administrator was leaked to the media ahead of the intended announcement. The directors very much regret the impact on the employees of City Link receiving such bad news on Christmas Day,” it said.
Better Capital, owned by venture capitalist Jon Moulton, said that the company’s interim financial report back in September had warned that City Link was experiencing a continued lack of profitability and that various options to maximise the value of the investment were being considered.
At the time, Better Capital took the decision to write down by 50% from £40m to £20m the value of the business – the value being determined on an estimated liquidation valuation basis.
It added: “Following a very detailed review of City Link’s strategy and prospects, including unsuccessful discussions with a number of counterparties to effect a sale on a going concern basis, the GP concluded that it was inappropriate to commit further capital from the 2012 Fund. Accordingly, in light of continued substantial losses, City Link could not continue as a going concern, which resulted in the appointment of (administrators) on December 24, 2014.”
Administrators from EY have begun the process of realising City Link’s assets. The BECAP12 Fund’s investment in City Link was structured as secured capital loans to protect its interests in such a process.
Better Capital said that while the company’s interim valuation of the BECAP12 Fund reflected an estimated liquidation value at September 30, 2014, this estimate was subject to uncertainty and to the effects of intervening trading. It said the ultimate outturn was currently expected to be reasonably close to the September valuation.
