City Link creditors likely to be substantially out of pocket

COVENTRY-based parcel delivery group City Link owed its suppliers around £30m when it collapsed into administration on Christmas Eve, new documents have revealed.

However, losses at the firm were so great that only around £600,000 is likely to be recovered from the business, leaving many companies substantially out-of-pocket.

The Daily Telegraph said documents from the company’s directors revealed City Link had a shortfall of £62.5m when it appointed administrators at EY.

The company likely to be worst affected is said to be Nottingham-based Barcode Warehouse, which supplied the delivery group with 2,500 hand-held Motorola MC67 scanners last autumn.

City Link said at the time that it had invested £2m to purchase the machines, which were to be distributed to all its drivers with the aim of improving efficiency.

The scanners were to be phased in on a depot by depot basis in time for the Christmas peak period.

City Link said so effective were the new scanners during an initial trial at one of group’s largest depots, in Bristol, that there had been a dramatic reduction in the number of customers making enquiries about the progress of their deliveries.

Somewhat ironically, Liam Tucker, City Link’s Operations Director said in a statement in November: “We believe our customers will reap real benefits once the scanners are rolled out across our whole network. We are very excited about the prospects.”

Now Barcode Warehouse is thought to be about £2.2m out of pocket following the collapse, which costs more than 2,600 employees their jobs.

The Telegraph said City Link employees are also owed £1.28m in unpaid wages, holiday pay and pension contributions while HM Revenue and Customs is owed £5m in PAYE, VAT and national insurance.

Royal Mail is also owed £1m in debts from the collapse, according to a list of creditors showed.

The employees are all expected to receive what they are owed by it is unlikely HMRC or suppliers will ever be fully reimbursed.

However, the group’s former owner, private equity firm Better Capital will recover around half of the £40m it invested in the business as it is a secured creditor.

EY is expected to outline proposals to creditors later this week.