Woolworths Unsecured Creditors Likely To Lose GBP1.1 Billion

Woolworths Group PLC's (WLW.LN) unsecured creditors are likely to lose the GBP1.1 billion owed to them and the company's 27,000 employees could lose part of their redundancy payments and pensions, the firm's administrator, Deloitte, said Tuesday.

However, senior lenders, who include GMAC Commercial Finance, and Burdale Financial, a subsidiary of Bank of Ireland PLC (IRE), will be repaid the GBP333.5 million owed to them in full.

Neville Kahn, Deloitte partner and joint administrator to Woolworths, said it wasn't yet clear whether the GBP37 million second-lien debt - debt that is second in line for being repaid - or the GBP63 million owed to pension trustees would be repaid in full.

Woolworths, which sold items including toys, candy, DVDs, CDs, books, greeting cards, children's clothing and household accessories, was placed in administration in November after management failed to reach a deal with the retailer's banks. All of Woolworths' 807 stores have subsequently been closed, and 27,000 jobs were lost.

Kahn said Tuesday that Woolworths' unsecured creditors, who are owed a combined GBP1.1 billion, were "highly unlikely" to be repaid.

Unsecured creditors to Woolworths' retail arm are owed GBP700 million, while creditors to its Entertainment U.K. business are owed GBP400 million.

Kahn said Woolworths' 27,000 former employees rank as unsecured creditors in respect to any redundancy payments they may be entitled to.

He said the Redundancy Payments Office, part of the Department for Business Enterprise & Regulatory Reform, would pay the employees some of the money owed to them but they would have to claim the remainder as unsecured creditors.

The amount Woolworths owes in redundancy payments isn't yet known, Kahn said.

However, he said employees' holiday pay would be paid-out in full because in that situation the employees were regarded as "preferential creditors".

Kahn's comments came after creditors meetings held Tuesday for both creditors to Woolworths' retail arm and creditors to its Entertainment U.K. business.

Kahn said creditors at the retail meeting asked why Woolworths' directors didn't stop the company trading earlier to limit losses. He said Deloitte would conduct an investigation into the matter and would report back to the creditor committee.

It was announced Monday that Woolworths PLC will be relaunched as an online store following the sale of its brand name and Ladybird childrenswear brand to Shop Direct Group, which is owned by the Barclay brothers, for an undisclosed sum.

-By Ainsley Thomson, Dow Jones Newswires; 44 20 7842 9318; [e-mail]

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