Vulture fund Hilco under fire for preying on High Street misery
Cashing in: Paul McGowan
Wilko’s administrators have defended the controversial role of Hilco, the vulture fund that swooped on the stricken discount retailer shortly before its collapse.
Hilco Capital loaned £40 million to Wilko and also acts as the liquidator of its stock, which has led to accusations of conflicts of interest.
Specialising in retail, Hilco has been on hand to help administrators with some of the UK’s most high-profile company failures, including at Woolworths, BHS and Debenhams.
It also owns DIY chain Homebase and the Denby pottery business after buying them when they ran into trading problems.
The business model has proved highly lucrative for the firm’s Belfast-born founder, Paul McGowan.
Hilco paid out dividends totalling £13.5 million in the past two years, most of which will have gone to him as the largest shareholder.
Wilko took the £40 million loan in January. That gave Hilco a seat at the top table of creditors and means the restructuring firm is likely get all its money back, unlike some others who are also owed large sums.
It is also in line to net chunky fees for advising administrator PricewaterhouseCoopers in valuing and selling off Wilko’s wares.
The GMB union, which represents some of the 12,500 workers facing redundancy, has raised concerns about a potential conflict of interest.
‘It’s clearly not right if a company owed money is also advising the administrators,’ said national officer Nadine Houghton. ‘In fact, it stinks.’
Hilco has a long history of making money from the High Street’s terminally ill and walking wounded.
The firm was set up 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 £132 million loan to a parent company ultimately owned by Hilco after receiving millions in state aid in the form of furlough money and business rates relief during the pandemic.
The DIY chain also handed more than £3 million in consultancy fees to Hilco firms, according to recent accounts. Hilco’s latest target is Superdry, the struggling fashion retailer. It has borrowed £25 million from Hilco – at the eye-watering rate of 10.5 per cent above the Bank of England base rate, currently 5.25 per cent. That means Superdry will pay almost 16 per cent interest on any cash it draws down.
The bumper paydays enjoyed by Hilco’s bosses contrast starkly with the uncertain future facing Wilko’s 12,500 staff and members of its pension fund, who risk losing some of their retirement benefits because the scheme has a £56 million hole.
As The Mail on Sunday recently revealed, the founding Wilkinson family paid themselves £77 million in dividends over the past decade – including a £3 million payment out of reserves last year as the loss-making chain headed towards the rocks.
But as Hilco’s dual role as lender and stock liquidator comes under more scrutiny, calls are growing for more regulation of the insolvency industry.
Last night PwC defended its role in hiring Hilco, saying its job was to get ‘the best outcome for creditors as a whole’.
‘Crucially, stock agents report to the administrators… we are responsible for all decision-making in pursuit of our statutory duties,’ it said.
Hilco was contacted for comment.