ETI withdraws Ideal cover

Smaller players could suffer

The channel could be facing a credit insurance crisis after one of the industry's biggest insurers, Euler Trade Indemnity (ETI), withdrew cover from distributor Ideal Hardware last week.

ETI's US subsidiary, Euler ACI, withdrew cover from Ideal's parent company, Bell Microproducts, in the US six months ago. It is believed to have mirrored the move in the UK following Bell's preliminary second-quarter trading statement.

The Q2 figures predicted a net loss of around $4m to $4.5m, compared with a profit of $384,000 the previous quarter.

A source close to Ideal said ETI's recent decision was "probably because of the ripple effect from the States following Bell's preliminary statement".

But Ian French, president of Bell Microproducts Europe, said: "To be honest, ETI's decision has less than one per cent impact on our sales and we are pretty confident that the issue will be resolved.

"However, the question isn't what they have done to us, but the implications of what they have done to the rest of the industry.

"If Euler can withdraw credit on a company the size of Bell, there isn't much hope for the smaller players out there. If Bell is being downgraded there isn't a reseller left in the UK, apart from Computacenter and SCC."

ETI's decision over Ideal will not affect the credit lines of its reseller partners, French said. He added that most vendors have expressed little concern over the move because the majority of them, such as Hewlett Packard and Microsoft, are self-insured.

"If ETI is going to open fire on us and other firms, such as Fujitsu Services, that bring a lot of business to it, it may mean it is looking for an exit from the IT market," French said.

Nitin Joshi, partner at insolvency specialist PKF, said: "We know that the channel urgently needs to take early remedial action when faced with a problem, but equally there needs to be a greater understanding between the credit insurer and the insured."

Noone from ETI was available for comment.