McErlain's Bakery supplier furious as 'pre-pack' buyout wipes debts
A supplier who was owed a four-figure sum by McErlain's Bakery has hit out after the bakery's sale to an investor wiped out all its old debts.
Stephen Boyd, managing director of family company Alexander Boyd Displays in Lisburn, said he is owed £7,200 by the bakery company, which has been bought over by Tayto boss Paul Allen after getting into trading difficulties.
The sale is a form of transaction known as a pre-pack administration, which results in suppliers losing out when an insolvent company is sold and its debts wiped out. A pre-pack was adopted for the recent sale of insolvent department store chain House of Fraser to entrepreneur Mike Ashley, so that debts of a total of £484m to suppliers have been wiped out.
Mr Boyd said his company had provided advertising displays for McErlain's products for which it hasn't been paid, and which he said were likely to still be in use by the business.
Now suppliers have been sent an email by the new owners asking them to trade with the company under Mr Allen - who is part of another company, Hatch Brothers - while stating that the old debt will not be repaid.
As well as the debt owed to Alexander Boyd Displays, it's understood there are other suppliers who are owed larger sums by McErlain's, which is based in Magherafelt. However, there are no indications of the total amount of its debt.
McErlain's is a supplier of buns and breads to supermarkets like Marks & Spencer, and also produces its own range under the Genesis Crafty brand.
An email seen by the Belfast Telegraph states: "We would very much appreciate it if you would be a supplier to the new company and appreciate that whilst McErlain's Bakery (Magherafelt) Limited has a debt due to you, this is not something that Hatch Brothers Limited can deal with.
"We feel that there is now a great opportunity for Genesis Crafty with the new leadership and would be grateful if you would trade with the new company under the terms previously agreed with McErlain's."
Mr Boyd, whose company has been trading for 72 years, said: "It is galling that someone can come in and it's almost like starting again with a clean slate, forgetting all about the old debts."
Administrators EY referred to a statement by its insolvency expert Andrew Dolliver from Tuesday, when the sale was announced.
"Our priority to McErlain's was to achieve a better result for the company's creditors as a whole and to identify a buyer who would bring the business back to a position of stability where it could continue to trade, and importantly, where its employees were protected," he said.
"We have worked closely with stakeholders in recent weeks to navigate a complex transaction and are pleased that McErlain's is now set up for a very positive future through the knowledge and experience which Paul Allen will bring to the fore."