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Clydesdale denies debt cover-up. Meeting hears electrical group's unsecured creditors may receive only 20p in the pound

A CLYDESDALE director yesterday denied that the board tried to hide the true state of financial affairs at Scotland's largest electrical group shortly before it collapsed with the loss of 850 jobs and creditors owed around #80m.

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Craig Murray, a director of the Clydesdale Group and company secretary of Clydesdale Electrical Stores, confirmed that the 1993 accounts were never filed.

But he insisted there was no breach of company law because an extension to the December 3 deadline for filing the accounts -- which would have shown mounting losses -- had been granted by Companies House.

Mr Murray said the only reason for not filing the accounts was that the audit had not been concluded.

Facing questions from the floor at the first meeting of creditors, he also denied that management had overvalued stock in last year's aborted bid to raise #40m during an attempted flotation on the Stock Exchange.

But he confirmed there had been an approach by an interested party to buy the business soon after the aborted flotation. Herald sources say that offer was not only worth #39m but could well have guaranteed Clydesdale's future -- and even brought immediate growth.

However, Mr Murray was adamant that shareholders were not informed about it because nothing had been put in writing and it was revocable.

Clydesdale went into receivership in January after a dramatic eleventh-hour appeal to its banks and investment institutions for a #4m lifeline to secure its immediate future was turned down.

That rebuff subsequently led to liquidation. Some 2500 unsecured creditors can now expect to receive just 20p to 30p in the pound, and some 17,500 customers may lose out on claims from money-back schemes operated by Clydesdale.

Major unsecured creditors include suppliers such as Sanyo, Phillips, Mitsubishi, and Sony, who are owed #30m according to joint liquidators Roger Powdrill and Ralph Preece, of Touche Ross.

Secured creditors, including the Bank of Scotland, the Royal Bank of Scotland, Barclays, and NM Rothschild and Sons, will recover the near #35m.

The receivership costs alone are estimated at #3.3m. When liquidation fees are added, the total will be well above that which the Clydesdale management claimed would have been sufficient to keep the group in business.

However, the 150-strong audience at the meeting in the Glasgow Royal Concert Hall appeared little interested in the reasons behind the Clydesdale Group's liquidation or its effects on many businesses owed money.

Instead, most questions involved the money-back promotions under which customers who bought goods were guaranteed to receive their money back eight years later.

Mr Powdrill confirmed that just one of the three schemes is covered by an insurance policy.

The 17,500 people in the refund scheme are being treated as contingent creditors because their claims against Clydesdale do not become effective until 1998 or 1999.

The liquidators are determined unsecured creditors should not have to wait that long before receiving any dividends from recent sales of assets. It is likely they will ask the Court of Session to clarify the legal position.

One option being considered is to have some of the creditors' purse ring-fenced for customers who become genuine creditors in 1998 and 1999. The pay-out could amount to #6.5m -- but no-one yet knows if the insolvency means that their claims will automatically fall.

The contingency creditors have been advised to investigate their rights as a third party and seek legal advice.

Melvin Mannion, one of the creditors at the meeting, said later he was owed #19,000.

Mr Mannion, managing director of a company which installed satellite dishes for Clydesdale customers in Manchester, Stockport, Bolton, Preston and Stoke, said he has had to lay off four of his eight staff.

Alexander Barr Screenprint, of Finnieston, Glasgow -- owed #58,000 -- said it faces going out of business, with the loss of 10 jobs.

Mr Powdrill said he will be considering the possibility that the Clydesdale Group could have been saved by a #4m injection by the banks, but added: ''Even the directors concede that would not have solved problems in the short-term and would have provided only some relief.''

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