Retailer's massive debt burden was no longer sustainable
Superquinn is continuing to trade profitably, so why is the company behind the retail chain going into receivership? That was the question many in Irish retailing were asking last night.
Along with Tesco and Dunnes Stores, Superquinn is one of the most successful retail brands ever created in Ireland, with a history going back to the early 1960s.
The reason appears to be two-fold. One is the sheer amount of debt the business has accumulated. It is understood to total over €375m, with large amounts of this debt owed to two Irish banks -- AIB and Bank of Ireland -- with Danish-owned NIB holding the remainder.
The Irish Independent understands that paying down the bank debt was proving to be a problem for Select Retail Holdings, the company which owns Superquinn.
Banks are currently not prepared to let companies trade without at least putting some dent in their debt piles.
The second reason the business is in trouble is the property assets that make up the company. They have massively reduced in value and this has sparked problems with the banks.
The other factor going against Superquinn's current owners is one of timing. They did a deal to buy Superquinn in 2005, just two years before the property market started to soften, for a hefty purchase price of €450m. That looks like it has become something of a millstone.
While it was bad timing for Select Retail Holdings, the timing was very fortuitous for Feargal Quinn, who currently has a link with the company as effectively its lifetime president.
In 2005, with Superquinn struggling financially as Tesco, in particular, stole a march on the market here, the writing was on the wall.
Losses were mounting and Select Retail Holdings smelt an opportunity. But at €450m, it's the Quinns that were the real winners.