Closure of Clerys: the unanswered questions

Several financial issues surrounding the closure of the iconic department store are yet to be resolved

The shuttered and closed Clerys in Dublin. There are a number of unanswered questions surrounding its closure.

The shuttered and closed Clerys in Dublin. There are a number of unanswered questions surrounding its closure.

 

The outcry about the treatment meted out to the sacked workers in the liquidation of Clerys, in the wake of last night’s RTÉ documentary on the issue, brings a renewed focus back onto some of the financial circumstances surrounding its €29 million sale to Deirdre Foley’s Natrium consortium.

The KPMG liquidators appointed to OCS Operations, the bust Clerys operating business, told the High Court they would investigate several issues that had been raised by creditors. To date, full details of those investigations have yet to be made public.

Meanwhile, some creditors have asked the Office of the Director of Corporate Enforcement to look into the full circumstances of the Clerys closure. Fianna Fáil’s Dara Calleary also confirmed to The Irish Times that he will be asking the ODCE to look into Clerys closure in a letter to be sent by his office this evening.

Here are a few of the outstanding issues that have yet to be cleared up:

The insurance cash: Why was approximately €1 million of the insurance proceeds from the flood that damaged Clerys reallocated from OCS Operations to OCS Properties, Clerys solvent property business that is now owned by Natrium, on the eve of the transaction? The shift is outlined in accounts signed off by the seller, Gordon Brothers, on June 11th. Clerys was sold and became insolvent later that night. The financial statement say the €1 million was originally allocated to the soon-to-be-bust trading business by “mistake”, but it did not elaborate further. Could that money have been used to pay off staff and suppliers if it had not been shifted?

Going concern: The same set of accounts, signed off by the Gordon Brothers directors of Clerys hours before it was sold and liquidated, said the store was being sold as a “going concern” and had financial support from its parent company. If they believed this to be the case, then why was it liquidated hours later?

The trading names: When Clerys entered the pre-pack receivership in 2012 that resulted in it being bought by Gordon Brothers, the trading names for the business, such as Clerys of Dublin and other store monikers, appeared to have been paid for by OCS Operations in a deal with the receiver. However, these assets appear to have ultimately ended up in the ownership of OCS Properties, which could give Natrium the right to use the potentially valuable Clerys name in future. Why were the trading names not joined to the trading business?

The concessionaires: Why did the sale process not include a stipulation for bidders that concession holders be “made whole”, or paid off in full, in any deal? If their takings were supposed to be held on trust, why were they paid into the same bank account as the bust trading business? When the liquidation occurred, the concessionaires’ cash was sucked into the insolvency process.

The lease: OCS Operations might have survived with fresh investment that came via a potential examinership process, instead of a liquidation. Its lease with OCS Properties had run out in March 2015, however. Without a premises from which to trade, Clerys was doomed. Why did OCS Properties not renew the lease with its sister trading business while the business was under the control of Gordon Brothers, if their intention was to sell it as a “going concern”?

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