Will Sports Direct now reap the whirlwind for USC mess? Unlikely


James Moore
Thursday 26 March 2015 00:38

We’ve known for a while that Sports Direct sails close to the wind in terms of its business practices. After the performance of its chairman, Keith Hellawell, before MPs on the Scottish Affairs Select Committee it’s clear that a more apt metaphor might be that it has been dancing with a hurricane.

The honourable members had originally wanted to hear from executive deputy chairman Mike Ashley, but were told that Mr Hellawell was better placed to answer questions concerning its fashion retailing arm, USC, which went into receivership in January only to be bought out of administration by another part of … you’ve guessed it, Sports Direct.

This was accomplished by one of those controversial “pre-pack” administration deals that have regularly been used by the bosses of failed retailers to keep hold of businesses they’ve run into the ground, shorn of lots of irksome obligations to creditors and employees.

Now, the USC administration has been causing controversy for a number of reasons, not just because 88 people were given only 15 minutes notice of their impending firing. Needless to say, the costs of their meagre redundancy payments were picked up by the taxpayer.

But what we have learned during the course of Mr Hellawell’s testimony was that chief executive Dave Forsey had been discussing administration last year without the knowledge of the board, which (according to Mr Hellawell) was doing everything in its power to keep the thing running as a going concern.

Sports Direct hires 75 per cent of its UK workforce on zero hours contracts

There’s more. A big problem for USC was that fashion brand Diesel was planning to cease doing business with it, and if Diesel pulled out others were sure to follow and there wouldn’t be much of a business left.

So, in an attempt to force Diesel to the negotiating table, Sports Direct withheld monies owed to it.

This seems to have been a favoured tactic. It had also withheld monies from Sir Tom Hunter’s private equity group, the landlord at USC’s Dundonald distribution centre (from where most of the job losses came). The aim? To force them to another negotiating table.

Unfortunately for Sports Direct, Sir Tom isn’t easily trifled with, and the warehouse was blockaded until the debt was paid (inconveniently it held Sports Direct as well as USC stock).

Sports Direct has long been a rather eccentric company. But the testimony of Mr Hellawell, who is, remember, a former copper with a law degree, painted a picture of a business that operates in a manner that goes way beyond that.

He maintained that the operation is confident that it breached no laws with respect to the way the administration was handled. One does rather wonder if he will be called upon to prove that, at some stage. But perhaps he and Sports Direct have done us one service: this tawdry affair might just be the final straw.

One, the bank that’s just like all the others

OneSavings Bank is one of the “challenger” banks that are supposed to shake up the established order – presumably by doing things differently to the traditional big four which, thanks to their conduct, have been substantially discredited.

It was born from the (near) ashes of the Kent Reliance Building Society, which started growing rapidly until it to hit a very big bump in the road in the financial crisis. Enter private equity firm JC Flowers, with capital to keep the show on the road for an equity stake in what would became One.

Now One’s back on the acquisition trail, buying a £251m-tranche of second charge mortgages. These, often used to finance things such as home improvement, sit behind first mortgages, and have second call on the property they’re secured against if a borrower’s finances go south. Because they’re more risky, they pay the lender more interest. That being the case, it’s hardly unreasonable to ask which “major financial institution” the firm is buying them from. But apparently we can’t be told because the seller is interested in offloading more of these things in the future.

What we do know is the tranche One is buying is paying an average interest rate of 9 per cent– pretty good when base rates are near zero. We’re also told that the average loan to value is 70 per cent – which is high-ish – and that they are “predominantly performing loans”. Whatever that means.

“Predominantly performing” is a phrase that might worry me if I were a regulator. It seems some of the banking industry’s old habits die hard.

Oh brother ... no escape from targeted TV ads

You will probably have noticed by now that products you’ve been looking at on Amazon are likely to be advertised on the websites you move on to after browsing the site. This is thanks to those marvellous things called cookies.

It’s rather harder to do the same thing over the TV, but that’s not stopped TV companies trying. Sky AdSmart has been allowing companies to target their ads to viewers answering certain criteria. Because the ads are only seen by small, specific groups, they’re cheaper to the advertiser, opening the medium up to a host of smaller outfits. AdSmart’s boss Graeme Hutcheson has hailed this as the “democratisation” of TV ads. Well, perhaps. Readers of a certain work by one Eric Arthur Blair – his pen name was George Orwell – might be just a little less enthused.

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