Clinton Cards' biggest supplier bought its bank debt and pulled the plug in a day

Clinton Cards was the UK's biggest greetings card retailer, founded in 1968 by Don Lewin, running 628 Clinton shops and 139 Birthdays stores with more than 8,000 staff. It was already failing quietly: a £3.6m loss for the half-year to 29 January 2012 against an £11.7m profit a year earlier, Ernst & Young hired to sell the loss-making Birthdays chain and finding no takers, Rothschild failing to find a buyer for the whole group, and the shares languishing at 7.70p — a £16m market value.

Clinton's loan facilities sat with Barclays and Royal Bank of Scotland, which had waived certain conditions. In early May 2012 the banks sold £35m of the loans to American Greetings — Clinton's largest supplier for 40 years, which had stopped shipping over late payments. Clinton expected the waivers to be extended; instead, 'having secured control of the debt, American Greetings immediately informed the board that it intended to enforce the loan'. Unable to repay, the board 'had no option but to concur' with administration, and Zolfo Cooper was appointed on 9 May.

A week later the administrators closed 350 of the 784 stores — all Birthdays branches included — costing about 3,000 jobs. In June the remaining stores went to Lakeshore Lending, an American Greetings subsidiary, saving 4,500 jobs. The mechanics were no accident: holding $56m (£36m) of Clinton's senior secured debt made the supplier a preferential creditor; it bid $37m of that debt for the assets in a credit bid and looked to recover the remaining $19m from the liquidation. Verdict Retail's Patrick O'Brien called it 'an aggressive bit of business' to protect its UK outlets.

350 of 784 stores closed within a week and about 3,000 jobs lost; of more than 8,000 staff, only the 4,500 at the surviving stores kept work

Clinton's balance sheet was already broken: from £11.7m profit to a £3.6m loss in a year, with no buyer for its loss-making Birthdays chain or for the group itself.

Supplier credit was a hidden funding line: American Greetings had already stopped shipping over late payments, and believed other suppliers had done the same.

The banks chose to sell rather than to keep waiving covenants: a £35m loan book was worth more to the supplier that depended on the outlets than to the lenders.

Secured debt plus a credit bid pre-decided the administrator's sale: the creditor wrote its own price in its own currency, and 4,500 surviving jobs became the argument for it.

A supplier who holds your bank debt is no longer a supplier but a claimant. Forty years of dependence ended the week American Greetings turned its trading position into ownership.

In October 2012, 12 of the remaining stores were sold to Clintons' rival Card Factory. American Greetings and its controlling Weiss family kept the business. On 4 December 2019 KPMG's Will Wright and Steve Absolom were appointed joint administrators to AG Retail Cards after landlords declined to back a company voluntary arrangement; the same day the brand and assets were sold in a pre-pack deal to Esquire Retail, a Weiss family company, keeping all 334 stores and 2,500 jobs. The chain taken by credit bid in 2012 was back in administration within seven years.