Clinton Cards to collapse into administration

Zolfo Cooper is being lined up as administrator, Retail Week has learned.

Clinton Cards banks Barclays and Royal Bank of Scotland sold the company’s £35m loan facilities to American Greetings.

Clinton Cards has been undergoing a strategic review of the business, led by chief executive Darcy Willson-Rymer, to try and turn around the struggling greetings card chain. He had been discussing the review with stakeholders since he completed it at the end of last month.

But immediately following the agreement that American Greetings will take on the debt, the supplier told the board it intended to enforce the loan against the company. Because Clinton Cards cannot repay the loan, the supplier informed Clinton Cards’ board that it intends to place the business into administration.

Around 8,500 jobs are at risk at the greetings card retailer.

Clinton Cards had believed that after American Greetings took on the debt, it would be able to enter into discusisons with the supplier in “regard to its ongoing support for the business”.

Although Clinton Cards was not in breach of financial covenant or repayment obligation under the facilities, it had been in receipt of temporary waivers for some technical breaches of default related to management changes and supplier related discussions. Clintons had expected American Greetings to “extend the waiver of the technical breaches of the loan agreement”.

Clinton Cards said in a statement to the Stock Exchange: “Having completed the strategic review, the board recognised the need to restructure the business and had been expecting to review its business plans and strategy with its stakeholders and exploring ways to produce a better outcome for the Company’s stakeholders as a whole.”

Clinton Cards was due to post its third quarter update on Thursday. Trading for the 14 weeks of the second half to date has continued to be “difficult”.  Group like-for-like sales dropped 3.5%, in line with the board’s expectations.

Clintons has been suffering from an expensive property portfolio as well as fierce compeition from store-based rivals including Cards Factory and online competitors such as Moonpig.

Retail Week revealed last month that the retailer was in talks with KPMG about options including a company voluntary arrangement.

Conlumino managing director Neil saunders said: “As painful as [the administration] will be, a forced restricting will ultimately be beneficial and a leaner, more financially viable chain will emerge as a result. In our view, American Greetings own interest in parts of the business cannot be precluded.”