Clydesdale Group PLC
Introduction
Clydesdale Group Inc is an electric retailer company which is more than a century old. It isconsidered the third largest electric retailer in the United Kingdom. In the 1983, it was subjected to a management buy-out but after a very short period, the performance of the company was not well and due to thisMr. Henk Van Eck was hired as the company administrator to improve the performance of the company.
The Administrator, Henk Van Eck
Mr. Van Eck received 51% equity of the company as remuneration for bringing the company back to a profitable condition. He employed an aggressive strategy and fired the current management and a major portion of employees.The main aim of his strategy was to get Clydesdale a listing in the stock exchange, and for that the company needed to expand and have sufficiently large operations.
Expansion Strategy
In order to expand the company required large amount of funds, therefore Mr. Van persuaded a bank to allow Clydesdales with a credit facility of 26 million pounds to proceed with his plans. His expansion strategy included establishment of superstores on streets of Scotland, he also closed the stores operating in England to increase efficiency of the company. With the help of Mr. Van Eck, Clydesdale Group was able to restore its health as the company owned a total of 134 outlets and had grabbed the 20% of the electric retail market in Scotland and became the biggest electric retailer.
Bankruptcy
However, the performance of the company deteriorated when its share flotation was stopped and the operations of the company were questioned. The inventory valuation of the company was a major issue for many investors as it was abnormally high.The performance of the company declined and it came to a position that it needed funds to continue its operations. The company requested its bank for more funds which the bank rejected and after some time based on the cash flow of the company, the bank appointed a receiver to dissolve the operations of the company. Although the bank was able to receive its amount back after selling the company however,the unsecured credit suppliers were the one who suffered as they could only receive 20% to 30% of the receivables.
Problem Statement
The key problem in this case from the perspective of unsecured creditors is that how they could have prevented this scenario by identifying the problems in the company earlier and rejecting any further credits.
Moreover,many businesses face the problem that customers, who are large and constitute greater share of sales for a businesses, have considerable powers of negotiations which they use to gain beneficial sales terms.In the case Clydesdale used its power to slow the payments of outstanding amounts, which resulted in creditors losing substantially large amounts...............
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