Trade credit insurer implicated despite pulling out before bookshop demise

Atradius has hit back at claims that trade credit insurers triggered the demise of bookstore Borders. Borders fell into administration last week, along with sister company Books Etc, leaving 45 shops facing closure.

A statement from administrators MCR pointed the finger at trade credit insurers, implying a pulling of cover helped precipitate the downfall. In its statement explaining why Borders went bust, it said: “A number of credit insurers have also reduced cover to the company.”

Borders was taken over in a management buy-out earlier this year, but the new team failed to turn around the ailing firm.

Insurance Times understands Atradius was one such trade credit insurer, although it had withdrawn cover on Borders many months before its collapse.

Atradius’s head of risk for UK and Ireland, Marc Henstridge, said cover had pulled even before the MBO. “In the case of Borders, the management team were made fully aware of the lack of trade credit insurance prior to the management buy-out earlier this year,” he said.

“It is therefore clear that trade credit insurers played no part its downfall; withdrawal of trade credit insurance is a symptom of a business in jeopardy, not a cause of its demise.”

Earlier this year, Euler Hermes UK chief executive Fabrice Desnos said failing companies were using trade credit insurers such as his as a “smokescreen”.

Euler Hermes Group was widely accused of helping trigger the demise of Woolworths in November last year, despite paying an estimated £50m in claims to suppliers.

Meanwhile, Atradius has said it will pump £1bn of extra capacity into the market. A spokesman for the company said the fresh capacity was currently being taken up. The spokesman said the firm had enhanced its information and risk management since the last year, helping pave the way for the extra capacity.