Consumer sector comment – July 2009


Throughout this year there have been several themes in retail. Firstly, the number of businesses suffering from difficult trading and bank pressure are being forced to consider some form of administration or financial restructuring. Secondly, there have been notable examples of other retailers, not just “value end”, who are prospering despite this environment including River Island,, Cult Clothing (Superdry) and to name a few. Finally, the continued buoyancy of the e-commerce sector, particularly those who are genuinely focused on developing a serious e-commerce or multichannel offer continue to grow well.

At Clearwater we are actively working with businesses in all these situations, however we are particularly focused at present on supporting management teams to steer through a refinancing or sale process as a means of keeping their business intact. Our recent work with Borders shows that a good result for all stakeholders can be achieved if advice is sought early enough. Many boards of directors have left matters too late to avoid a bank driven administration being the only alterative. Our combination of truly independent advice based on true retail, senior level banking and private equity experience plus an international network that accesses overseas trade buyers is proving to be very powerful.

Retail stories

Clearwater advises on management buy-out of Borders UK. Clearwater Corporate Finance has advised the management team of Borders UK, a leading book retailer, on their management buy-out backed by Hilco’s private equity arm Valco Capital. The deal provides an exit for Luke Johnson’s Risk Capital. The deal was completed in two months.

Elvi Holdings bought out of administration by Sharpnet. Sharpnet, a Bolton-based business has saved more than 140 jobs after buying women’s’ plus-sized clothing retailer Elvi for an undisclosed sum. Elvi was placed into administration in February this year. The deal should ensure the long term future for Elvi at its various outlets throughout the UK.

Modelzone undergoes a management buy-out. Modelzone Holdings Ltd, a Sussex-based model retailer, has undergone a management buy-out with the backing of Lloyds Development Capital Ltd. The buyout was led by Chief Executive David Mordecai, with the support of Terry Norris, incoming non-executive chairman. LDC has provided an initial sum of £5.9 million to fund the buy out plus promises of additional funds to further develop the company, including to make selective acquisitions.

Allied Carpets bought out of administration. Allied Carpets Group plc, the home furnishing retailer, has sold its 51 stores and its insurance inspection business to Allied Carpets Retail Ltd, a newly formed company set up by the management team and private equity firm Valco Capital Partners. Former bosses of Woolworths and MFI, Steve Johnson and Gary Favell, have been parachuted in to help turn around the business.

Lombok acquired by a consortium of buyout groups. Lombok, the UK-based furniture retailer has been acquired by Privet Capital and Paradigm alongside other investors including the existing management team. The consortium will close five stores but retain fourteen. The deal has secured 124 jobs.

All Saints secures refinancing deal. All Saints Retail has secured a £30 million refinancing deal with Lloyds TSB Corporate Markets. The deal allows them to continue their domestic and international expansion. The financing replaces previous funding from Icelandic bank Landsbanki.