Phones 4U: Huge sums owed to creditors and staff
Fri, 14th November 2014

Phones 4U: Huge sums owed to creditors and staff

By David Casey, Digital News Editor

Thousands of workers owed money following the collapse of Phones 4U may have to wait up to a year to receive unpaid salaries, Insider can reveal.

And administrators from PwC have confirmed that unsecured creditors, including the taxman which is owed almost £80m and customers who bought handsets prior to the failure, are unlikely to receive anything.

Insider last month revealed that more than £100m is expected to be available to pay secured creditors of the mobile phone retailer, but investors stand to lose out on hundreds of millions of pounds.

A new document, seen by Insider, has shed more light on the prospects for trade creditors and former employees of the Staffordshire-headquartered group, which failed in September when EE followed Vodafone's decision not to renew a network agreement.

At the time of the administrators' appointment, Phones 4U Ltd, the group's main trading company, owed £26m to members of staff in unpaid wages and holiday pay.

The retailer employed 5,592 workers at the time of the collapse, with 3,416 made redundant or choosing to leave. Deals with EE, Vodafone and Dixons Carphone saw 2,021 staff transfer, while 112 were kept on to assist PwC.

Insolvency legislation states redundant workers can claim wages up to £800 and all outstanding holiday pay, but any cash owed on top of that will have to be claimed back from the government's Redundancy Payments Office.

The administrators have estimated £3.4m will be available to former staff, but it could take up to 12 months to pay them the cash they are owed.

Of the unsecured creditors, HM Revenue & Customs is set to lose out on about £78m and trade creditors are unlikely to recoup much of the £42.2m they are owed. The number of suppliers owed money stretches into the hundreds, with councils, mobile phone makers and property companies among those listed.

Members of the public who bought handsets, including the new Apple iPhone 6, in the run up to the administration are also owed £4.8m. There is little prospect of them being able to recover anything.

Phones 4U, which was owned by private equity firm BC Partners, had £111m in the bank at the time of the administrators' appointment after Lloyds had cleared its overdraft positions.

EE, Vodafone and Dixons Carphone picked up assets totalling £15m while administrators have raised further sums through the sale of thousands of iPhones which had a book value of £29.4m.

As previously reported, holders of Phones 4U's £430m senior secured notes, which were listed on the Irish Stock Exchange, are set to be the biggest losers from the administration. The total shortfall to them is expected to be more than £300m.

PwC has also confirmed it has now instructed US law firm Quinn Emanuel Urquhart and Sullivan to assist with conducting an investigation into the failure.

The administrators said: "We have identified a number of areas for further investigation, which are likely to include a review of distributions to shareholders, directors' conduct and negotiations with, and the conduct of, the [mobile network operators]."

But they added it was "too early to form any assessment on what action may be possible or necessary".

category Midlands  |  source Insider Media