COURTS FURNITURE RETAILER

Courts collapsed into administration after its bankers pulled the plug on the struggling furniture retailer. Its shares were suspended at 13.5p. The group was poised to appoint KPMG to extract what value it could from its troubled UK business, leaving the future for the group's 89 UK stores and 1,400 employees hanging in the balance. Its overseas operations, in the Caribbean and the Far East, where it owns a further 264 stores, could also be affected although it is currently trading well. The company, which has in effect been in the hands of its bankers since the summer, said it was on the verge of breaching its banking covenants. It said the 24-strong banking syndicate, led by Bank of Nova Scotia, had refused to provide any more cash.

The blow for Courts's shareholders followed a statement that the group's bankers were preparing to waive "certain" covenants. The company has spent the past five months attempting to reassure the City that it retained the support of its bankers. In June 2004, its bankers granted it an extra £20m lifeline, increasing its revolving credit facility to £280m. "The board has been informed that the principal lenders will not grant waivers for the covenant breaches likely to occur shortly, nor will they provide immediate additional funding required," it admitted. Its shares, which halved, were suspended by the Stock Exchange at 13.5p after falling 1.25p "pending clarification of the company's financial position".

KPMG is understood to have been advising Courts's UK banking group for some time. Analysts predicted the administrators would break up the group, paring down the UK business by selling the larger UK sites on a piecemeal basis until it was left with a rump that might interest a trade buyer. KPMG declined to comment. Courts's dramatic demise illustrates the escalating pressures in the UK's furniture retailing market. The group's aged store estate, infamously advertised by the comedian Bruce Forsyth, with the catchline "I'll see you in Courts", failed to compete with a glut of recent new entrants in one of the country's most fragmented retail sectors. GUS recently began pushing more sofas through its Homebase chain.

The group's collapse also wipes out the bulk of the fortunes of one of the country's oldest retailing dynasties. The Cohens, who destroyed the business they built up during the latter part of the last century, still control the company with a combined 44% shareholding. But the last of the family members to sit on the board were ousted this summer by a quartet of directors installed by the company's bankers, including Leo McKee, the chairman. After the latest fall in the group's share price the Cohen family's stake was worth just £3.6m, down from £90m earlier this year. It could now turn out to be completely worthless.

Although Henry Court founded the company in 1850 from a single site in Canterbury, it took the retailing prowess of three Cohen brothers, Henry, Alfred and Edwin, to turn Courts into a worldwide chain. The trio gained their retailing spurs at the British & Colonial Stores Group, which their family built up and bought the Canterbury site from Henry's grandson in 1945. It took them just over a decade to expand to 25 stores across southern England and Wales. The overseas business owes its origins to Edwin Cohen who, on a Caribbean cruise in 1958, visited Kingston, Jamaica and liked it so much that he opened a shop there. The company floated 10 years later on the Jamaica Stock Exchange, a move that led to several overseas listings.

Today four scions of the Courts's family are believed to hold the stock, with the largest single block at 10% owned by Bruce Cohen, who ran the business for 17 years before finally quitting in June 2003. Courts's downfall could mean thousands of customers who have goods on order with the company are left out of pocket. The group's bankers will have first call over its assets, which means its shareholders are also unlikely to see any of their money again. The company, which had sales of £286m in 2003, was still waiting to receive new stock to fulfil its Christmas 2004 orders.

Threats from customers of insolvent furniture chain Courts prevented stores opening to let shoppers collect purchases. Many customers have lost money because Court's financial problems mean that furniture makers will not now fulfil the chain's outstanding orders. Meanwhile, KPMG has sold off Courts Contracts to its management team. The non-core unit operates from eight warehouses and fits out show homes for residential building companies.

It was sold for an undisclosed sum as part of KPMG's efforts to find buyers for the troubled company. "We are expecting to get offers in for significant parts of the business early to middle of next week," said KPMG's head of corporate recovery, Mick McLoughlin. Courts' administrators, KPMG, say they want to reopen the company stores, but have a duty to protect staff.

A full stock-check has identified more than 3,000 customers who would be able to pick up their furniture if the firm's 88 stores in England and Wales were reopened. "The perverse thing is that we've got 3,000 pieces of furniture which we will quite happily deliver to people but because we can't guarantee the safety of Courts staff or our own staff we can't deliver that furniture," he said.

A director of Courts furniture firm hanged himself after losing his company pension. James Jacobs, 61, was found by his wife hanging in stables at home in Oxton, Notts, after being reported missing. He had worked for furniture firm Courts for 17 years and his family said the collapse of the chain "was a cross he found intolerable to bear". It is thought the group's pension scheme has a deficit of around £14m. Solicitor Duncan MacLaren said, "Mr Jacobs found himself at the end of his working life in a situation he was unfamiliar with, being a senior employee of a company that had failed and therefore having to start again." (Source: The Independent)

Customers who lost out when the chain collapsed WILL receive their furniture. SB Capital, owners of the Furnitureland chain and half of Land of Leather, will take over the business and the US group has promised to honour the orders of ALL 50,000 customers who paid Courts money but did not receive their goods before the company went bust owing £280million. Mick McLoughlin, of administrators KPMG Corporate Recovery, said all 4,000 people who paid in full for furniture in stock would get it.

He added, “Remaining customers who made payments in full will receive orders where possible. If this is not possible, they will have the opportunity to choose alternative items of the same value. For those customers who have paid by deposit, they will be offered alternative items less ten per cent discount, whilst others will have a claim against their credit card companies.”