JAG survives as bank pulls £2m overdraft
Owner John George holds on to company through ‘prepack administration’
JAG Communications has averted a collapse after undergoing a ‘prepack administration’.
This effectively means moving its valuable assets into a separate company, and writing off a big chunk of its debt in the process.
Problems are understood to have arisen after the retailer’s bank, Lloyd’s, withdrew the company’s £2m overdraft, stopping JAG from paying its liabilities.
The company’s biggest creditor was the Government’s treasury, which JAG owed what is believed to be over £2m in VAT. That debt has stayed with the old company and is effectively no longer a concern for the new business.
Companies typically hold back VAT during tough trading periods, to maintain cashflow.
Company owner and founder, John George, is still the owner, and is believed to have spent under £500,000 in buying the business from the administrators.
George has taken on the liabilities, including money owed to network suppliers and cashbacks to JAG customers, which total over £500,000.
Negotiations will now start with networks and distributors for a new set of terms under the new company, as well as landlords. With the downturn in retail, JAG is likely to secure more favourable terms on leases, given the weak position landlords now find themselves in.
JAG, the country’s third largest independent mobile retail chain after Carphone Warehouse and Phones 4u, is expected by those close to the business to be in a stronger position after the ‘prepack administration’. This is due to the loss of such a large debt, and securing better terms with its landlords.
The company’s administrators, Begbies Traynor, said the company will not close any of its 75 stores – which are mainly based around the south-west of the country.
JAG already closed ten stores in November which weren’t performing, but up until the end of January was still paying for the leases. The new company will no longer be obliged to pay the leases for stores that are closed.
From a statement issued by Begbies, George said: ‘It will be sad to see the old company go, but we are really pleased to be able to secure the jobs of almost all of our staff across the company. As with most retailers, we will be looking for a period of consolidation before we take the company forward again.’
New staff contracts are being issued under the new company, and around seven staff have decided not to stay on.
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