Pressure for fire sales grows on receivers: Ferranti and Swan Hunter in spotlight

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The Independent Online
RECEIVERS at Ferranti and Swan Hunter are under intense pressure to achieve fire sales of their companies following the Paramount Airways court ruling, which has made receivers personally liable for employees' claims arising from their employment contracts.

Such a fire sale would cut the amount of money receivers could get for their companies, which would in turn hit creditors, mainly the high street banks.

Neville Trotter, the Conservative MP, said he had called for an urgent meeting with the corporate affairs minister Neil Hamilton next week to discuss the crisis, after being contacted by receivers in the Swan Hunter case.

The Paramount Airways ruling, which Mr Trotter attacked as 'amazing and irrational', elevates employees' rights in receiverships so that they can make claims against the receivers if they have been kept on for any period longer than 14 days.

The national body for receivers, the Society for Practitioners of Insolvency, ended a day of crisis talks on Thursday by concluding that the entire system of saving troubled companies in the UK was in effect now dead because of the Paramount ruling.

Steve Hill, an insolvency partner with Coopers & Lybrand and a key technical figure with the SPI, said yesterday that after the Paramount ruling, as far as receivers were concerned, 'every sale is now a fire sale'.

Big business failures such as Leyland Daf, where receivers managed to keep parts of the business trading and to sell them on, saving thousands of jobs, would now have to be shut down within a fortnight.

Despite a week in which at least two receivers have dismissed workforces rather than face the liabilities created by the ruling, the Government has remained largely unaware of the problem.

Chris Ashurst, an insolvency practitioner with the accountants Neville Russell, confirmed this when he lunched with Tim Sainsbury, the Minister for Industry, yesterday. When Mr Ashurst asked the minister how the government intended to remedy the situation, Mr Sainsbury indicated that he would be opposed to anything that stood in the way of a market- led solution, such as that which had been so effective in the case of Leyland Daf.

Mr Sainsbury said that since the 'alarm bells hadn't rung at the department' he did not believe the problem was as serious as Mr Ashurst had outlined.

A DTI spokesman said last night that it was giving the Paramount ruling 'urgent attention'.

It is understood that a number of high street banks have approached the Bank of England to intervene.

The receivers Stoy Hayward this week sacked the workforce at Wimbledon and South West Finance, a small City bank in receivership, directly as a result of the Paramount ruling. According to Mr Hill, receivers from Coopers were also forced to sack a dozen employees at a building contractors' company this week, again because of Paramount.

There is also a fear, Mr Hill said, that current administrations may collapse because businesses will refuse to trade with companies in administration. People will realise that administrators are personally liable to claims from employees going back several years, he warned.