This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful.
Business News Retail Top Stories
Virgin Group won’t have to pay out over Zavvi collapse
By CMU Editorial | Published on Tuesday 13 January 2009
Good news for the Virgin Group, it looks likely it won’t have to shell out millions to cover the debts of its former Megastore business Zavvi.
As previously reported, when Zavvi went into liquidation it was widely reported the retailer’s former parent company had guaranteed its credit facility with Woolies owned distributor eUK after the management buyout that created the independent retail firm.
When eUK itself went into administration it was reported that Zavvi was its biggest debtor, owing a reported £80 million (some reports reckoned more). As Zavvi itself started to crumble it was thought eUK’s administrators, Deloitte, may soon be knocking on the doors of Richard Branson’s Virgin Group asking for payment of the Zavvi debts it had guaranteed.
But according to Music Week, Zavvi’s administrators Ernst & Young managed to negotiate its debts to eUK down to £40 million (which sounds like quite a big achievement, given the Virgin guarantee on those debts).
Zavvi had £20 million in reserve to pay half that debt, and good sales over the Christmas period means there should be enough revenue to pay off the rest. Good news for Virgin.
Less so for the record companies owed millions by eUK, who will presumably see a smaller pay out as a result of Zavvi’s reduced account.
This is double good news for Branson and the Virgin Group really. First, they managed to get their brand name off the high street before the recession kicked in, and now they won’t lose out because of Zavvi’s collapse.
The only members of the Virgin family who may as yet be affected by Zavvi’s collapse are those who are employed to man the Virgin Mobile outlets that remain in many of the music seller’s stores. It’s thought that if Zavvi closes down completely Virgin will quietly close down those outlets too, stand-alone Virgin Mobile stores not really being viable at the moment.
