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Here’s Why Bankrupt Arcadia’s Unsecured Creditors Won’t Get Much on Their Claims

Sir Philip Green’s Arcadia Group collapsed into administration on Nov. 30 under a mountain of debt.

How much? A report in The Telegraph, which said it has seen documentation prepared by the fashion empire’s administrators at Deloitte, said the company had 750 million pounds ($1.03 billion) outstanding. Over half of that amount, or more than 550 million pounds ($754.5 million), was attributed just to the Topshop and Topman businesses, the crown jewels in the Arcadia retail empire.

The 750 million-pound debt load is staggering because it’s more than what the Arcadia empire was valued at before the start of the coronavirus pandemic, and the same goes for Topman and Topshop’s 550 million.

A year ago, Arcadia was worth an estimated 800 million pounds ($1.09 billion), with Topshop and Topman representing about half of that valuation. However, those valuations dropped to roughly half of the original estimated amounts after Arcadia collapsed into administration, the U.K. equivalent of  U.S. bankruptcy.

So far, the only brand within Arcadia that has been sold was Evans, a plus-size women’s apparel brand whose intellectual property, customer base and inventory went to City Chic Collective for 23 million pounds ($30.6 million).

Under discussion are exclusive talks between fashion e-tailer Asos and Arcadia‘s administrators for the brands Topshop, Topman, Miss Selfridge and HIIT, Asos said on Monday. It wasn’t immediately clear what numbers are under discussion, but it could be in the 300 million pound range ($409.7 million), since the brands Asos is looking to acquire include the Topman and Topshop plus two other brands.

The status of Arcadia’s remaining brands—Dorothy Perkins, Burton and Wallis—is unclear, but could bring in additional value for unsecured creditors should other buyers step forward.

While the final tally of what the sold brands would eventually bring in won’t be known for some time, there’s a chance that the totals could be lower than 400 million pounds ($548.7 million), representing Arcadia’s value at the time of its administration.

The caveat is that whatever that number will be will only be further reduced. From that figure will be deductions connected to administrative expenses, such as legal costs and fees to Deloitte for its oversight of the bankruptcy case. But those costs have a way of adding up, leaving far less that becomes available for distribution to creditor claims.