Awesome Merchandise administration: Firm owed over £5m at time of collapse with creditors set to lose cash

Last month, the company entered a pre-pack administration with its assets being transferred to a new company run by the same owner.

It was argued that the move was necessary to retain the jobs of 94 staff following the company’s business being hit by the pandemic.

Awesome Merchandise Ltd provided services to business and individual consumers across the music industry, creatives and power users of print via its e-commerce platform.

After being placed into administration, it was immediately sold to a newly-established business called Print.Inc Group Ltd, whose only director is Luke Hodson – the man who founded Awesome Merchandise in 2009.

Last month, administrators Interpath Advisory confirmed that more than 1,000 people who had invested over £650,000 into Awesome Merchandise via a crowd-funding investment platform website called Crowdcube would not be treated as creditors – meaning they will not receive any money.

Interpath has now published its administrator’s proposal which has revealed more about the company’s finances.

The report reveals that unsecured creditors are collectively owed over £3m. Of that, more than 160 trade creditors made up of different companies and organisations are owed over £2.8m.

But it warns: “Based on current estimates, it is highly unlikely there will be a dividend to unsecured creditors.”

A further £1.9m is listed as owing to secondary preferential creditors, including HMRC.

The report says: “Based on current estimates, we do not anticipate that there will be sufficient funds to enable a dividend to the secondary preferential creditor.”

It says the total assets available to secondary preferential creditors is estimated at £102,000.

Employees owed money as ordinary preferential creditors are likely to receive some back but the report said the amount will be “uncertain” until a later stage of the administration process. A total of £18,000 is listed in relation to this group of creditors.

The report also states that the company owes a £190,000 bank debt to Barclays Security Trustee Ltd which is being treated as a secured creditor. The report states that while there is expected to be a dividend to this creditor, it is likely to be at “a shortfall against amounts they are owed”.

The report also estimates the costs of carrying out the administration process at over £408,000.

Interpath’s report said it had been employed in June to explore sale, refinance and investment options as a result of “increasing creditor pressure”.

It said 150 parties had been approached as part of an “extensive marketing process”.

But with the only deliverable offer being on an insolvent basis, Interpath said the best option available was the pre-pack administration.

It said: “A pre-packaged sale of the business and assets of the company provides more realisations for creditors, more certainty regarding levels of realisations and a lower risk of deteriorating the creditor position than either trading on in administration or a controlled shut down in administration.

“It also saves 94 jobs, reducing preferential and unsecured claims against the company.

“Consequently, a pre-packaged sale is considered in our opinion, in all of the circumstances, to be the best course of action for the general body of creditors as a whole.”