Nothing left for Phones 4U creditors

Nothing left for Phones 4U creditors

Unsecured creditors to bankrupt mobile phone retailer Phones 4U are expected to be told they will receive little or nothing of their investment. Phones 4U went bust in September 2014 with debts of £168m after its last remaining supplier EE – estimated to account for around half of the company’s handset sales - followed 02 and Vodafone in cutting ties with the retailer.

PwC, the administrators appointed to oversee Phone 4U’s wind up, is due to update creditors with a progress report this week after warning in November that they would receive around 0.4% of their money back with the £430m owned to banks and bondholders being given priority for reimbursement. 

One of those creditors is EE, which revealed a £336m write down on the commission it paid Phones 4U in advance for signing up new subscribers and servicing and retaining existing customers which ultimately were not booked. The transaction was cited as the main factor behind a 22% dip in EE’s stated pre-tax earnings in the year 2014 included in the financial statement as an exceptional item and recently presented to BT shareholders in preparation for the telco’s proposed £12.5bn buyout of the operator. HM Revenue & Customs is also estimated to be owed £78m in VAT and corporation tax. 

PwC’s report may also provide more details concerning the legal investigation being carried out by law firm Quinn Emanuel Urquhart & Sullivan into the circumstances surrounding Phone 4U’s demise. The retailer made pre-tax profits of £43.8m from £1.16bn revenue in its last full year of operation after its owners, private equity group BC Partners, took out a series of loans to fund a £223m special dividend a year before the Phones 4U collapse. BC Partners brought Phones 4U for an estimated £600m in 2011, £395m of which was funded by bank loans, meaning its owners pocketed an £18m profit.


Please wait...

Please write code to prove you're human