Reuters: Bankruptcy News: UPDATE 2-Rug pulled from under struggling Clinton Cards

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UPDATE 2-Rug pulled from under struggling Clinton Cards May 9th 2012, 12:58 Wed May 9, 2012 8:58am EDT * Clinton Cards says cannot repay 35 mln stg loan * Owner of debt proposes to place the company in administration * Debt was sold to new owner, supplier American Greetings, by Barclays and RBS * Analyst says job losses, store closures likely By Sarah Young and Paul Hoskins LONDON, May 9 (Reuters) - Retailer Clinton Cards is set to become the latest casualty on the British high street after its debt was sold by lenders including state-owned RBS and subsequently called in, putting thousands of jobs at risk. Clinton Cards, said it had no option but to agree to a proposal by the new owner of the debt, its biggest supplier American Greetings, that it should be placed in administration as it could not repay a 35 million pounds ($56.5 million) loan. The company, which employs over 8,000 people in the UK, warned on its outlook in March, amid tough trading conditions, and as it battles intense competition from supermarkets and the Internet. British shoppers' disposable incomes have been squeezed by rising prices, muted wage growth and government austerity measures, hurting less diversified retailers like Clinton Cards, and causing a growing number to fall by the wayside. Analysts said the expected administration was a surprise, however, as the supplier had enforced the loan. "The supplier has pulled the rug, so it's by no means a usual sequence of events. The question really is why the supplier hasn't been more supportive," independent retail analyst Nick Bubb told Reuters. American Greetings could not immediately be reached for comment. Bubb added that he expected to see job losses and store closures as a result of a the administration. A spokesman for Clinton Cards said an administrator was expected to be appointed later on Wednesday, adding that around half of the company's 8,000 employees worked part-time. The Essex-headquartered firm, which trades from 767 stores under the Birthdays and Clinton Card brands, said it was in breach of some conditions attached to the loans. The group said it was informed overnight that its banks Barclays and Royal Bank of Scotland (RBS), which had given it temporary waivers over the breaches, had sold the loans. Both Barclays and RBS, 82 percent owned by the UK government since a 2008 bailout, declined to comment when asked by Reuters whether they knew before selling the loans to American Greetings that it planned to enforce it. Clinton Cards said that it had not been party to negotiations leading up to the deal but that it had anticipated American Greetings would extend the waivers granted by the banks and start talks with a view to supporting it. The firm said it had planned to restructure its business and further details regarding its plans were due to be published in the coming weeks following the completion of a strategic review led by Chief Executive Darcy Wilson-Rymer, a former Starbucks executive, who joined in October. Clinton Cards said in March that it had slumped to a first half loss and warned that its prospects for the second half were worse than originally anticipated. Shares in Clinton Cards, which have lost more than 80 percent of their value since the start of 2010, closed at 6.75 pence on Tuesday before being suspended from trading on Wednesday, valuing the group at about 14 million pounds ($22.6 million). Link this Share this Digg this Email Reprints

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