Pre-pack administrations are becoming more common. Four Holdings' purchase of Agent Provocateur illustrates the attraction of pre-packs — the ability to cherry-pick the best assets, acquire the goodwill of a well-known business that continues to trade, and retain its key staff without having to take on liabilities to creditors —and why existing management is likely to be supportive.
However, because an administrator is only required to provide creditors with information after the sale, pre-packs have given rise to suspicions of cosy deals, particularly as there will have been limited marketing to avoid the financial position of the business becoming widely known.
To address these concerns, guidelines have been amended. Since 1 November 2015, administrators have had to follow tighter rules: they must give more extensive information to creditors about the sale, meet standards for advertising the business and provide to creditors more explanation of the marketing of the business. Greater clarity in pre-pack deals has at least gone some way in alleviating those suspicions.
This article was first printed in Drapers. Since its publication, it has been announced that another well-known UK brand, Jones Bootmaker, has also been rescued in a pre-pack administration deal.