Channel out of pocket after City Link collapse
Report released by joint administrators Ernst & Young (EY) shows list of channel firms that are owed thousands
A number of resellers, vendors and distributors are among those creditors owed a share of £30m following the high-profile collapse of courier firm City Link last Christmas.
More than 3,000 people were informed they had lost their jobs on New Year's Eve, many finding out their fate when turning on the news on Christmas Day.
A joint administrators progress report by administrator Ernst & Young (EY) is due in July this year, but the interim report, which describes the administration as a "regrettable situation" and one they "planned to avoid", paints a bleak picture of spiralling administration costs and dwindling returns.
In a letter to creditors sent this week, EY said: "As you will note from the proposals, there is no prospect of any funds becoming available to unsecured creditors of the Companies other than by virtue of the prescribed part in City Link only. As a consequence, I do not propose to summon meetings of creditors."
According to the report, HMRC is the biggest single creditor, owed a total of £5.02m, with hundreds of suppliers owed a combined total of £30.6m.
IT firms awaiting money back from the company include Sungard Availability Services, which is the biggest industry creditor owed more than £333,000; closely followed by Vodafone with £323,000.
Virgin Media and BT are owed £224,000 and £200,000 respectively.
Further down the creditors’ list is office supplies distributor Spicers, which is owed about £62,000, and VAR giant Kelway which is £48,000 out of pocket. Bytes Document Solutions is owed £36,000 and Secon £31,000. Bringing up the rear are Oracle with £18,000 outstanding, O2 with £17,000 and finally Azzurri Communications with £16,000.
In addition, the report revealed City Link employees are owed £439,000 in unpaid wages, and unpaid employee holiday pay stands at £703,000. Finally, unpaid employee pension contributions stand at £141,000 – taking the grand total to £1.28m.
According to a report by www.thisismoney.co.uk, directors believed the business could be turned around only days before the plug was pulled by owner Better Capital, which injected £40m into the business in 2013 and is expected to recoup about £20m of its investment. The same article alleged that a number of IT suppliers and contractors "held the company to ransom" while demanding they were paid for services rendered, with the latter holding on to parcels until they were paid.
The City Link business was paraded in front of prospective buyers as early as last autumn, but talks fell through before Christmas.
However, one of the most interesting outcomes of the report is the amount of money being spent on the administration itself, with the EY report revealing it has run up more than 5,300 hours of work.
According to the document, a top partner can earn a maximum of £895 an hour, and the lowest-level analyst can command between £95 and £220 an hour for their services.