Carpet retailer Carpetright was sold for almost £4m in prepack deal to flooring retailer Tapi, new documents have revealed, while creditors are set to lose over £300m.

Zelf Hussain, Rachael Wilkinson and Peter Dickens, of PwC, were appointed as Joint Administrators of Carpetright Ltd on 22 July 2024.

Ahead of its collapse, Carpetright’s latest accounts saw revenues reach £227m with a negative EBITDA of £44m for the FY23, while its preceding year, the company posted sales of £257m with a negative EBITDA of £30m.

This had been driven by changing consumer preferences and a drop in home improvement spending post-pandemic, in addition to challenges in the operating model.

In December 2023, in order to ensure the company had sufficient working capital, the Carpetright brand and IP were transferred to NHL in exchange for a fresh cash injection of £12m. This was to support the company to implement its business plan to improve sales, reduce costs and return to profitability by FY26.

In April 2024, the business suffered a cyber attack leaving it unable to trade online or in-store for the just over a week. This added to the already existing financial challenges and negatively impacted working capital further.

In the build up to its administration, Carpetright sought advice and a review from PwC in May 2024 following the worsening of its liquidity position. The review identified that it would not be possible to finance the working capital requirements using company assets alone, while the HMRC rejected attempts to put in place a time to pay arrangement over unpaid taxes. The HMRC then notified the company it would take steps to wind it up in the event of non-payment.

The ultimate result meant that insolvency was inevitable and therefore filed its intention to appoint administrators to the court on 12 July 2024.

On appointment of administrators, a sale of 54 stores and two logistics hubs was completed to CWHP Ltd., part of the Tapi Group, for a total sum of £3.7m – paid in full, with the transaction including the transfer of 308 employees.

As for creditors, first ranking preferential creditors – mainly employees owed £2.2m, are expected to be repaid from realised assets valuing £11.3m, which were attributed to the asset sale and cash at the bank valuing £7.6m. Secondary creditor, the HMRC, owed £9.2m is expected to repaid from the remaining figure, leaving a shortfall of £48,000.

Unsecured creditors are owed a combined figure of £213.8m, while a floating charge of £120m is also owed to secured creditor Nestware Holdings Limited. Included within the unsecured claims is £81.3m owed to Carpetright Eire, a further £54.7m owed to Nestware Holdings and £17.2m owed to Carpetright of London Ltd. Microsoft is also owed £3.1m, while Condor Carpets BV is owed over £1m.

It is expected that creditors will suffer a total shortfall of £337.8m.

The cost of the administration process by PwC reached £751,000. Zelf Hussain, Joint Administrator, commented at the time of the sale of assets: “Carpetright has fallen victim to challenges facing many retailers, especially those selling big ticket items. A mixture of factors, including a big reduction in consumer spending due to cost of living pressures, lower home sales and a debilitating cyber attack made it impossible for the business to continue in its current form.

“The sale of some stores and the brand to Tapi has allowed over 300 jobs to be saved, and gives the Carpetright brand the chance to continue and flourish under its new ownership.

“However, it is deeply saddening that for the remainder of the workforce there will be redundancies. We are committed to helping those affected and will make sure redundancy claims are processed as quickly as possible. In collaboration with Tapi, we will assist in efforts to help individuals find new jobs elsewhere.

“We know this is an uncertain time for many of those affected and want to thank all the staff for the support they have given the company in these difficult circumstances.”

Since the appointment of administrators, Bensons for Beds announced that it has successfully acquired 19 locations where Carpetright were trading previously, while the sister company of Carpetright, The Floor Room, has also collapsed into administration and is being wound down.

Adam Seres, Zelf Hussain, and Peter Dickens, of PwC, have been appointed as Joint Administrators of The Floor Room Limited. Read more here.

Carpetright was founded in 1988 and operated across 273 stores in the UK and the Republic of Ireland, with its headquarters based in Purfleet, Essex. It had 1,898 employees.