Shareholders stare into the abyss as Courts collapses

Banks call time on furniture retailer - Customers could lose money already paid for goods on order
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The Independent Online

Courts collapsed into administration yesterday after its bankers pulled the plug on the struggling furniture retailer. Its shares were suspended at 13.5p.

Courts collapsed into administration yesterday after its bankers pulled the plug on the struggling furniture retailer. Its shares were suspended at 13.5p.

The group was last night poised to appoint KPMG to extract what value it could from its troubled UK business, leaving the future for the group's 89 UK stores and 1,400 employees hanging in the balance.

Its overseas operations, in the Caribbean and the Far East, where it owns a further 264 stores, could also be affected although it is currently trading well.

The company, which has in effect been in the hands of its bankers since the summer, said it was on the verge of breaching its banking covenants. It said the 24-strong banking syndicate, led by Bank of Nova Scotia, had refused to provide any more cash.

Yesterday's blow for Courts's shareholders followed a statement on Friday that the group's bankers were preparing to waive "certain" covenants. The company has spent the past five months attempting to reassure the City that it retained the support of its bankers. In June, its bankers granted it an extra £20m lifeline, increasing its revolving credit facility to £280m.

"The board has been informed that the principal lenders will not grant waivers for the covenant breaches likely to occur shortly, nor will they provide immediate additional funding required," it admitted. Its shares, which halved on Friday, were suspended by the Stock Exchange at 13.5p after falling 1.25p "pending clarification of the company's financial position".

KPMG is understood to have been advising Courts's UK banking group for some time. Analysts predicted the administrators would break up the group, paring down the UK business by selling the larger UK sites on a piecemeal basis until it was left with a rump that might interest a trade buyer. KPMG declined to comment.

Courts's dramatic demise illustrates the escalating pressures in the UK's furniture retailing market. The group's aged store estate - infamously advertised by the comedian Bruce Forsyth, with the catchline "I'll see you in Courts" - failed to compete with a glut of recent new entrants in one of the country's most fragmented retail sectors. GUS recently began pushing more sofas through its Homebase chain.

The group's collapse also wipes out the bulk of the fortunes of one of the country's oldest retailing dynasties. The Cohens, who destroyed the business they built up during the latter part of the last century, still control the company with a combined 44 per cent shareholding. But the last of the family members to sit on the board were ousted this summer by a quartet of directors installed by the company's bankers, including Leo McKee, the chairman.

After the latest fall in the group's share price the Cohen family's stake was worth just £3.6m - down from £90m earlier this year. It could now turn out to be completely worthless.

One retail analyst said: "There have been issues about the competence of the family for some time."

Although Henry Court founded the company in 1850 from a single site in Canterbury, it took the retailing prowess of three Cohen brothers - Henry, Alfred and Edwin - to turn Courts into a worldwide chain. The trio gained their retailing spurs at the British & Colonial Stores Group, which their family built up and bought the Canterbury site from Henry's grandson in 1945. It took them just over a decade to expand to 25 stores across southern England and Wales.

The overseas business owes its origins to Edwin Cohen who, on a Caribbean cruise in 1958, visited Kingston, Jamaica and liked it so much that he opened a shop there. The company floated 10 years later on the Jamaica Stock Exchange, a move that led to several overseas listings.

Today four scions of the Courts's family are believed to hold the stock, with the largest single block at 10 per cent owned by Bruce Cohen, who ran the business for 17 years before finally quitting last June.

Courts's downfall could mean thousands of customers who have goods on order with the company are left out of pocket. The group's bankers will have first call over its assets, which means its shareholders are also unlikely to see any of their money again. As recently as last week, the company, which had sales of £286m last year, was still waiting to receive new stock to fulfil its Christmas orders.

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