SIR Tom Hunter’s West Coast Capital has absorbed £151 million of debts owed by its retail investment subsidiary, and appears poised to do a similar deal to relieve pressure at its property arm.
Accounts filed for West Coast Capital (WCC) Trading – which manages the Ayrshire entrepreneur’s slimmed-down retailing portfolio – reveal that it completed a debt-for-equity swap after net debt reached £239.6m by the close of the financial year to 31 January. A spokesman for Sir Tom confirmed all of that cash was owed to the parent company, a private partnership set up by the businessman in 2001.
Meanwhile, abbreviated accounts for property investment subsidiary WCC Holdings show that its cash fell to less than £139,000 by 30 March, down from £12.2m the year before. At the same time, net liabilities soared as debts due to be repaid within the current year swelled to £163.9m.
Ewan Hunter, a spokesman for West Coast who is not related to Sir Tom, said converting debt to equity had put the retail investment subsidiary in a strong position. He added that debts at WCC Holdings were “not of any concern” to West Coast.
“In time, over the year, we will see the debt in the other arm of the business significantly reduced,” he added, suggesting the possibility of another intervention by the parent company.
WCC Holdings is invested in thousands of industrial, retail and domestic properties across the UK, Europe and elsewhere, and also manages Sir Tom’s 12 per cent stake in department store operator House of Fraser. Notes to WCC Holdings’ accounts indicate it notched up losses of £32m for the year.
Assets include the freehold on about 100 Travelodge hotels owned by Prestbury Hotel Holdings, a joint venture with high-profile investor Nick Leslau. Returns from many of those properties will fall in the coming year as Travelodge negotiates lower rental payments as part of a company voluntary arrangement (CVA) designed to save the budget hotel chain.
Retail subsidiary WCC Trading posted losses of £16.4m for its financial year to the end of January.
The return to the red – following profits of £28.2m the previous year – was accompanied by a slump in turnover triggered by the sale of 80 per cent of designer clothing chains USC and Cruise.
WCC Trading took a £4.6m loss on that deal, which gave Sports Direct a controlling interest in USC and Cruise. Hunter said the disposal was a shift of strategy for Sir Tom, who made his original fortune by selling his Sports Division chain to JJB Sports in 1998.
“We have moved from being a retail operator to a retail equity investor,” Hunter said, noting West Coast still owns 20 per cent of Cruise. “Never say never – but it is unlikely we will go back to owning and running retail chains.”
The “new breed” of investments includes companies such as eCommera, which builds online trading platforms for large retailers.
WCC Trading has a 42 per cent stake in eCommera, which has so far proven a better investment than its 27 per cent stake in Flying Brands, the former mail-order operation now on its way to becoming a quoted cash shell. Flying Brands’ last remaining book value was written off last year at a cost of £1.8m.