One small lender, four corporate crashes

Finance house Burdale blames high risks for string of British receiverships. Jason Nissé reports

A small finance company, backed by US banking giant Wachovia, has emerged as a key lender behind four of the biggest corporate collapses in Britain this summer.

Burdale Financial, based in London's West End, petitioned to have three companies - Powerhouse, the electrical retailer; Arthur Sanderson & Sons, the wallpaper manufacturer; and Selkirk International, which makes chimney pots and ventilation ducts - placed in receivership.

It was also the leading lender to Carpets International - the Yorkshire-based group whose brands include Kosset, Wilton Royal and Crossley - which collapsed last month.

In the case of Powerhouse, Burdale had been a lender to the company for a matter of months, stepping in after Lloyds TSB withdrew its banking facilities.

Burdale is run by Dennis Levine and Brian Gitlin, two South African financiers who were behind a trade finance group called Associated Henriques in the late 1980s that collapsed after running up bad debts. After that, Mr Levine and Mr Gitlin stepped back from the public company arena.

Mr Levine said it was an unfortunate coincidence that the new group had seen four of its clients collapse in such a short time. However, it reflected the more risky nature of the lending that Burdale does and its willingness to lend to companies that need "turning around", he said. "When banks are turning away and not lending money, we come in and replace the bankers.

"It is not in our interests for companies to go into receivership," he added.

Burdale specialises in asset-backed finance - lending secured against either a physical asset, such as a building, or an intangible asset, such as a trademark or a future stream of income.

It typically lends only to companies that banks would not conventionally lend to - those with debts of more than 3.5 times their operating incomes. For this, it charges as much as 2 per cent more than the banks would.

Burdale is one of a group of American companies which have imported this form of lending to the UK, with other major players being BankofAmerica, GE Finance and GMAC, a subsidiary of General Motors. ABN Amro, the Dutch bank, and Lloyds TSB are understood to be eyeing the market.

These firms tend to make bigger loans than factoring companies, such as Bibby Financial Services, which lend in exchange for a company's debtor book. Bibby has been active this year, petitioning to put over 40 companies into receivership, according to the Insolvency Service website.

Diane Blinkhorn, Bibby's marketing director, said this was a consequence of the economic downturn.