FT Article - on line a few hours ago8 Dec 2022 08:23
As below
‘Warrington Borough Council approved a £202mn loan facility to entrepreneur Matt Moulding shortly after producing an internal report that erroneously said the money was going to his ecommerce company THG.
The Labour-led local authority approved the loan to entities controlled by Moulding in October 2020 after reviewing a council report that repeatedly described THG as the borrower and touted the company’s financial strength.
“The Council has the opportunity to provide a £202.133mn investment loan to The Hut Group (THG) against a portfolio of?.?.?. assets in the North West,” said the report, obtained by the Financial Times.
The report described THG as having a “proven business model centred around recession-proof products” and noted that “the loan negotiated with THG” was at a competitive rate. It added that THG had a “credit rating of BBB [which] is expected to increase in the future. This will increase the value of the Council’s loan to the investor market.”
However, the loan in reality went to an entity called Icon 3 Holdco and three related borrowers — all owned by Moulding. THG, which had a junk rating rather than a BBB rating, was not the borrower.
The discrepancies in the report raise questions about the process by which the council made what was its biggest commercial loan.
The FT obtained a redacted version of the report following a Freedom of Information request first submitted in September 2021. Warrington released the report last month after the Information Commissioner’s Office intervened.
The portions released to the FT make no mention of Moulding nor the fact that he, not THG, controlled the entities the council was financing. When THG floated in September 2020, Moulding transferred the company’s property portfolio to himself and became the ecommerce group’s landlord.
Warrington told the FT that the cabinet was “clearly told the loan was to entities controlled by Matt Moulding”. The council said this was “covered extensively” in portions of the report that were not released due to commercial confidentiality and during a “risk management workshop” prior to the report being issued.
Lawyers for THG and Moulding said Warrington knew the loan was being made to entities controlled by Moulding well before the facility was agreed and that the council was aware that THG was not intended to be a counterparty. Neither Moulding nor THG made any representations to Warrington about THG’s credit rating, the lawyers told the FT.
Over the past decade, UK local councils have made large investments in a variety of commercial ventures, often taking on significant debts to do so, in an effort to shore up budgets hit by cuts in central government funding’
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