Facia falls into receivership
Retail chain collapses under pressure from creditor and auditors
Sunday 02 June 1996
The move followed emergency meetings between the auditors and the company's board last week and the lodging of a High Court petition by retail giant Sears to put Facia's shoe chains into administration.
Sources close to the company say the latest in a series of special board meetings with auditors Deloitte & Touche broke up on Friday with no resolution of concerns regarding its accounts.
These were understood to relate to questions about the way the Sock Shop to Saxone shoes group was being run and its sources of funding, following a detailed audit by the accountants.
Sources said its relationship with principal bank backer, Israel's United Mizrahi Bank (UMB) was a key area of concern. After an internal investigation, UMB's London branch recently sacked a manager, John Doherty, after concerns over improperly secured lending.
The probe centred on other loans, but industry sources confirm Mr Doherty was one of Facia's account managers. UMB declined to elaborate last week. "We don't make any comment on customer relationships because of confidentiality. We don't comment on any of our current or former staff either," said Christine Stradling, head of personnel.
Mr Hinchliffe and fellow director Christopher Harrison are already facing disqualification by the Department of Trade and Industry after the collapse of another company, Boxgrey, in 1993. Facia was also facing fines unless it filed its accounts to January 1995 by 1 July.
Mr Hinchliffe built Facia up into the country's second largest private retailer after Littlewoods in a flurry of deals starting in 1994, with acquisition of the loss-making Salisbury's luggage chain, backed by Scottish fund manager Murray Johnstone.
Sock Shop, fashion chain Red or Dead, lingerie specialist Contessa and menswear group Oakland followed. The acquisition of Sears' struggling shoe shops, including Saxone and Freeman Hardy & Willis, increased the number of shops to 850.
On Friday, Sears lodged a petition in the High Court to put the shoe shops into administration after Facia failed to pay its rent. Sears says it is owed pounds 4m, plus stock, and will take a pounds 25m provision for disposal of the 380 shops. Under its deal with Mr Hinchliffe, it also paid some 1,400 staff but was reimbursed by Facia. However, sources say a cheque for staff wages also bounced earlier last week.
Facia was seeking pounds 20m-pounds 40m in further funding and last week confirmed it was in talks with the Nasdaq-quoted shell company Texas American Group over a possible takeover. The announcement hardly inspired creditors' confidence, according to industry sources.
TAG, which claims golf clubs and hotels in Europe among its assets, is run by Bill Grosvenor, a London-based former adviser to Polly Peck's Asil Nadir and an undischarged bankrupt and convicted fraudster.
TAG also said it was seeking revenue itself but would attempt to sell shares in the US to refinance Facia.
At the end of last week, a Facia spokesman was still maintaining that the firm was solvent saying that the company's debt at the end of April stood at under pounds 10m, against annualised sales of pounds 250m.
He also confirmed the funding came principally from UMB and other firms owned by Mr Hinchliffe outside Facia, including the lighter and pens supplier Calibri and the toilet-ries firm French & Scott, which Mr Hinchliffe bought in 1994.
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