May 9, 2012 / 7:50 AM / 6 years ago

UPDATE 3-Clinton Cards collapse puts 8,000 jobs at risk

* Zolfo Cooper appointed administrators

* Zolfo Cooper: a number of stores likely need to be closed

* Clinton Cards says cannot repay 35 mln stg loan

* Debt was sold to new owner, supplier American Greetings

By Sarah Young and Paul Hoskins

LONDON, May 9 (Reuters) - Clinton Cards became the latest casualty on the British high street putting nearly 8,000 UK jobs at risk after its American supplier called time on its debt.

Clinton Cards, which trades from 767 stores under the Birthdays and Clinton Card brands, said on Wednesday it had appointed administrators Zolfo Cooper because it could not repay a 35 million pounds ($56.5 million) loan to its biggest supplier American Greetings.

The Essex-headquartered retailer was informed overnight that its banks Barclays and Royal Bank of Scotland, which had given it temporary waivers over the breaches, had sold the loans to American Greetings.

American Greetings - which recently stopped shipping to Clinton Cards - said apart from the secured debt, it had about $25 million of unsecured exposure to the company, a majority of which was now in default.

“There have been repeated discussions with Clinton Cards since September 2011 concerning issues with our on-going supplies to it,” the U.S. firm said. “Despite this, Clinton Cards has defaulted in respect of numerous payment obligations under our supply arrangements.”

The company added other suppliers had also stopped shipping to Clinton Cards, given its financial difficulties.

Zolfo Cooper said they will continue to trade the business while undertaking a “full marketing exercise” to find buyers for all or parts of the group, while American Greetings said it could ultimately participate in the ownership of Clinton Cards or as a supplier to any buyer.

“It is likely that a number of stores will need to be closed in order to make the business financially viable,” it added.

Clinton Cards, which has said around half of its 8,000 employees work part-time, had warned on its outlook in March, amid tough trading conditions, and as it battles intense competition from supermarkets and the Internet.

British shoppers’ disposable incomes have been squeezed by rising prices, muted wage growth and government austerity measures, hurting less diversified retailers like Clinton Cards, and causing a growing number to fall by the wayside.

Analysts said the expected administration was a surprise, however, as the supplier had enforced the loan.

“The supplier has pulled the rug, so it’s by no means a usual sequence of events. The question really is why the supplier hasn’t been more supportive,” independent retail analyst Nick Bubb told Reuters.

Both Barclays and RBS, 82 percent owned by the UK government since a 2008 bailout, declined to comment when asked by Reuters whether they knew before selling the loans to American Greetings that it planned to enforce it.

Clinton Cards said that it had not been party to negotiations leading up to the deal but that it had anticipated American Greetings would extend the waivers granted by the banks and start talks with a view to supporting it.

The firm said it had planned to restructure its business and further details regarding its plans were due to be published in the coming weeks following the completion of a strategic review led by Chief Executive Darcy Wilson-Rymer, a former Starbucks executive, who joined in October.

Shares in Clinton Cards, which have lost more than 80 percent of their value since the start of 2010, closed at 6.75 pence on Tuesday before being suspended from trading on Wednesday, valuing the group at about 14 million pounds.

Our Standards:The Thomson Reuters Trust Principles.
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