Tue 12th Mar 2013 - Breaking News - Government orders review of pre-pack administrations Government orders an independent review of pre-pack administrations: The government has announced an independent review into controversial pre-pack administrations during a Parliamentary debate on pre-packs. The pre-pack administration has been a feature of the sector since the credit crunch – the first and most high profile pre-pack occurred in 2008 in respect of Laurel Pub Company when it was owned by Robert Tchenguiz and acquired 293 of its 383 outlets through two new companies in the wake of administration. In 2008, private equity investor Jon Moulton called into question the use of pre-packs in the sector. He said at the time: “I think you’ll see a lot of pre-pack administrations – and some controversy. They are under a lot of scrutiny. Not getting the best value back for assets is the danger. There has to be a good reason for doing pre-pack administrations – and I’m not convinced there is in the pub group world. Would it matter if a company traded for a month in administration while orderly bids were found? But owners of leases on pubs that get dumped aren’t very likely to be willing victims. It’s an abuse of the market if you do that through pre-pack administration. That companies will fail properly is beyond doubt and administration done properly is doing what it was designed to do: sorting out the problem. Administration used incorrectly in pre-pack is not acceptable.” He also told The Daily Mail: “Pre-packs could be very easily abused. Bad management can plan for a pre-pack months in advance, line up an administrator - and then be back running the business immediately. It means when retailers fail they are often being kept with the same directors when it would be much healthier if new management arrived and with fresh money to invest. It is not a procedure that has any legal basis. It has grown up as a practice and no one has yet had the enthusiasm to contest it.” However, in 2010 he appeared to backtrack by describing pre-packs as “not all bad”. A timescale will be announced at the time the review is launched in late spring. A spokesman for the Insolvency Service said: “The government has listened carefully to the concerns of creditors about pre-packs and that is why we already have measures in place to increase transparency and prevent abuse. Strengthened measures are being introduced to improve the quality of information insolvency practitioners are required to provide on pre-pack deals and we are using targeted monitoring of outcomes to assess whether there is evidence of abuse. Used appropriately, pre-packs can be a highly effective process to ensure the best deal for creditors by better enabling the rescue of businesses, preserving value and safeguarding jobs. The independent review announced by the Minister will enable further evidence to be assembled on how pre-packs are working in practice and whether further steps are needed.”