PPI News - Shop Direct needs £150m cash injection for PPI

PPI News – Shop Direct needs £150m cash injection for PPI

Shop Direct needs £150m cash injection for PPI

Auditors of Shop Direct have warned that the firm could collapse unless it gets a cash injection of £150 million to cover its PPI compensation.

Announcing that it needed to add £241 million to pay out future successful PPI claims, the online retail firm shocked its investors who had already provided £100 million in support.

Material uncertainty

Auditors Deloitte said it was not yet clear where the money would come from, creating “material uncertainty… about the group and parent company’s ability to continue as a going concern”.

Shop Direct owns online retailers Littlewoods.com and Very.co.uk which both sold PPI to their customers and suffered a surge in complaints before the claims deadline in August.

New claims

Used to receiving an average of 40,000 claims a month, the firms were hit with more than a quarter of a million new claims in August alone – many times more than had been estimated.

A spokesman for Deloitte said: “Due to the funding gap the group and company may be unable to realise their assets and discharge their liabilities in the normal course of business”.

Multi-billionaire twins

The Shop Direct group is owned by multi-billionaire twins the Barclay brothers and the PPI problem has added more bad news to their struggling business empire which also includes the Ritz Hotel and the Telegraph Media group.

It is understood the twins have already poured in £325 million over the last 18 months to prop up their businesses and the need for extra finance has come at a difficult time.

For sale

The Telegraph Media Group posted a substantial profit loss of 94% earlier this year and the brothers have put both the Daily and Sunday Telegraph titles up for sale.

Shop Direct is in the middle of investing lots of capital in stock required for the Christmas rush and is also spending heavily on a new warehousing facility in Derby which will save £25 million a year when complete, but is taking £200 million in capital spending to create.

Options

A spokesman said: “A number of options are being considered with our financial advisers and we expect funding to be in place shortly.

“The business continues to trade well and as we get ready for peak trading we have never been in better shape to deliver a great Christmas to our customers.”

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