The publication of a progress report by City Link’s administrator earlier this week highlights just how much of a rough deal creditors get when a company goes into administration.
Administrator Ernst & Young (EY) believes that non–preferential creditors, which include trade creditors who are collectively owed more than £30m, will only receive about 1p for every pound they are owed by the failed parcel firm- half of the 2p they were told to expect in February.
With some of City Link’s largest creditors- including Royal Mail and Lex Autolease- each owed in excess of £1m, the payout they should receive based on this latest update seems paltry in comparison.
EY estimates that no more than £600,000 will be available to trade creditors through the payment of the 'prescribed part' - a ring-fenced sum which is used to pay non-preferential creditors when a company goes into administration.
But as creditors lose out, the administrator expects to receive a £3.5m payment for the time it has already spent on getting City Link’s affairs in order- and that's just six months into the insolvency process.
