Vulture fund Hilco criticized for profiting from High Street misery
Taking advantage: Paul McGowan
Wilko administrators have defended the controversial role of Hilco, the vulture fund that swooped on the stricken discount retailer shortly before its bankruptcy.
Hilco Capital lent £40m to Wilko and is also acting as liquidator of its shares, which has led to allegations of conflicts of interest.
Retail specialist Hilco has been on hand to help administrators with some of the UK’s most high-profile business bankruptcies, including Woolworths, BHS and Debenhams.
He also owns DIY chain Homebase and pottery business Denby after buying them when they ran into trading problems.
The business model has proven very lucrative for the company’s founder, Belfast-born Paul McGowan.
Hilco has paid dividends totaling £13.5m over the past two years, most of which will have gone to it as the largest shareholder.
Wilko agreed to the £40m loan in January. This gave Hilco a place at the top table of creditors and means the restructuring firm is likely to get all its money back, unlike others that are also owed large sums.
It is also in line with the high net fees for advising administrator PricewaterhouseCoopers on the valuation and sale of Wilko’s products.
The GMB union, which represents some of the 12,500 workers facing redundancy, has raised concerns about a potential conflict of interest.
“It is clearly not right for a company that is owed money to also advise directors,” said national manager Nadine Houghton. “Actually, it sucks.”
Hilco has a long history of making money from the terminally ill and wounded walkers of the High Street.
The company was founded by McGowan and former Harrods boss Paul Taylor in 2000 as the London arm of the US restructuring firm of the same name.
Homebase repaid a £132m loan to a parent company, ultimately owned by Hilco, after receiving millions in state aid in the form of furlough and business rates relief during the pandemic.
The DIY chain also handed out more than £3m in consultancy fees to Hilco companies, according to recent reports. Hilco’s latest target is Superdry, the struggling fashion retailer. It has borrowed £25 million from Hilco, at a eye-watering rate of 10.5 per cent above the Bank of England’s base rate, currently 5.25 per cent. That means Superdry will pay almost 16 per cent interest on any cash it withdraws.
The extraordinary salaries enjoyed by Hilco’s bosses stand in stark contrast to the uncertain future facing Wilko’s 12,500 employees and members of its pension fund, who risk losing some of their retirement benefits because the plan has a funding hole. £56 million.
As The Mail on Sunday recently revealed, the founding Wilkinson family paid themselves £77m in dividends over the last decade, including a £3m payout of reserves last year as the loss-making chain headed for the rocks.
But as Hilco’s dual role as lender and liquidator comes under greater scrutiny, calls are growing for greater regulation of the insolvency industry.
Last night PwC defended its role in hiring Hilco, saying its job was to achieve “the best outcome for creditors as a whole”.
“The most important thing is that brokers report to administrators… we are responsible for all decision-making in compliance with our legal obligations,” it said.
Hilco has been contacted for comment.