Vulture fund Hilco under fire for preying on High Street misery

Wilko’s directors have defended the controversial role of Hilco, the vulture fund that raided the stricken discount chain shortly before its collapse.

Hilco Capital lent £40 million to Wilko and also acts as trustee of the shares, which has led to allegations of conflict of interest.

Hilco, which specializes in retail, was on hand to help administrators through some of Britain’s most high-profile corporate failures, including Woolworths, BHS and Debenhams.

It also owns the Homebase DIY chain and pottery business in Denby after buying them when they encountered trading problems.

The business model has proven very lucrative for the company’s Belfast-born founder, Paul McGowan.

Hilco has paid out a total of £13.5 million in dividends over the past two years, most of which will have gone to it as its largest shareholder.

Wilko took on the £40 million loan in January. That put Hilco at the top of the creditors’ ranks and means the restructuring company is likely to get all its money back, unlike some others who are also owed large sums.

It also corresponds to high net fees for advising manager PricewaterhouseCoopers in valuing and selling Wilko’s wares.

The GMB union, which represents some of the 12,500 workers facing redundancy, has raised concerns about a potential conflict of interest.

“It is clearly not right for a company that owes money to also advise administrators,” said national officer Nadine Houghton. “It actually stinks.”

Hilco has a long history of making money from the terminally ill and walking wounded on the High Street.

The company was founded in 2000 by McGowan and former Harrods boss Paul Taylor as the London arm of the US restructuring firm of the same name.

Homebase repaid a £132 million loan to a parent company ultimately owned by Hilco, after receiving millions in state aid in the form of furlough pay and business rates relief during the pandemic.

According to recent reports, the DIY chain also handed over more than £3 million in consultancy fees to Hilco companies. Hilco’s latest target is Superdry, the struggling fashion retailer. The country has borrowed £25m from Hilco – at an eye-watering interest rate of 10.5 per cent above the Bank of England base rate, currently 5.25 per cent. That means Superdry will pay almost 16 percent interest on any money it withdraws.

The huge payouts enjoyed by Hilco’s bosses are in stark contrast to the uncertain future of Wilko’s 12,500 employees and pension fund members, who are at risk of losing some of their pension benefits because there is a gap in the scheme £56 million.

As The Mail on Sunday recently revealed, the founding Wilkinson family paid themselves £77 million in dividends over the past decade – including a £3 million payment from reserves last year when the loss-making chain collapsed.

But as Hilco’s dual role as lender and equity clearer comes under increasing scrutiny, calls for greater regulation of the insolvency sector are growing.

Last night PwC defended its role in hiring Hilco, saying its job was to achieve “the best outcome for creditors as a whole.”

“It is critical that securities agents report to the administrators… we are responsible for all decision-making in pursuit of our regulatory duties,” the report said.

Hilco was contacted for comment.