The banks are Hill Samuel, Bankers Trust, Standard Chartered, Bank of Scotland, Continental Bank, Creditanstalt, Bank of America and Long Term Credit Bank of Japan. They helped to finance Airedale's buyout of Magnet three years ago and are owned money from the original loans as well as unpaid interest. A spokesman for Magnet said: 'The banks obviously have no prospect of seeing their loans start to perform.'
As part of a package of measures, the banks have acquired all of Magnet Group, the new owner of the operating business. They have also received an initial payment of part of the debt. The receivers are Peter DuBuisson and Andrew Sykes of BDO Binder Hamlyn.
It also emerged that John Foulkes, who was hired to sort out the group soon after the buyout, will shortly receive pounds 2m, a payment that he was guaranteed whether the company prospered or not. He has become chairman and chief executive of Magnet Group.
A spokesman played down the importance of yesterday's receivership, describing it as an 'administrative reorganisation'. The banks would be repaid out of the profits of the operating business or from its eventual sale, he added.
But Mr DuBuisson said the directors of the operating company were entitled under company law to retain all profits within the business if they were needed for working capital. This meant that there was no guarantee that Magnet Group, the company owned by the banks, would receive dividends from the business. He said that if the profits were retained, the business would become more valuable and could eventually be sold.
The buyout, staged at the peak of the market for do-it-yourself retailers, was controversial because shareholders said the bid was pitched too low and the terms favoured the new investors and the then managers, led by Tom Duxbury.
But it soon turned out that the buyout team had offered too much. As the recession intensified, prospects for repaying Airedale's debts from Magnet's profits receded. The deal also ran into trouble because of its structure. Airedale bore the debts but did not directly own the assets of the business, which were owned by a subsidiary.
The kitchen and joinery business continues in business, unaffected by yesterday's announcement. A spokesman said the business had made profits in some months. 'It is bumping along the bottom,' he added.
A spokesman for Standard Chartered said it had already made some provisons against its lending to Airedale. Other banks are likely to have taken the same approach, as the prospects of repayment have looked bleak for years.
The size of any further provisions depends in part on the value Magnet could be expected to fetch in any eventual sale or flotation.
The operating company has net assets of pounds 140m and the banks have agreed a pounds 10.4m 10-year facility for the business, suggesting they are taking a long-term view of their commitment.Reuse content