Knitwear company rejects bid to buy premises as row rumbles on

Judane, the knitwear company which owes nearly half a million pounds to the public purse, has rejected a private sector offer to buy its factory at the Blackhill Industrial Estate – a move which would have seen all but £50,000 of their debt to Shetland Development Trust (SDT) being recovered.

T&N Joinery, a firm which has grown in recent years and now has a payroll of more than 45 employees, operates with two workshops and a showroom in Lerwick. It had been looking to buy the factory in order to bring all of its services together onto a single site. A spokesman for T&N said it had made what it believed was a good offer for the building but Judane director Frank Miller had refused to sell and the idea was now “dead in the water”.

Head of economic development Neil Grant confirmed this week that Judane still owes £484,000 to the development trust dating from a loan investment, plus interest, made in 2003 to allow the firm to expand its knitwear operation, before it gave up operating the large factory in February 2005.

According to a confidential council paper from earlier this year, seen by The Shetland Times, T&N Joinery was the only party to make a concrete offer for the premises by a deadline of 24th April.

Councillors were told about the joinery firm’s bid for the factory premises by Mr Grant during a private development committee session, after which a number of members – including Cecil Smith and Iris Hawkins – said they would like to see a time limit imposed on Judane for selling the factory on the open market.

According to the minutes from the session, chairman Josie Simpson outlined that the other option would be to have the business placed into administration. Head of legal Jan Riise said that although members wanted to see the factory sold on the open market, Judane would need “some release of their obligations” in order to enable acceptance of “the only offer currently on the table”.

Mr Riise explained to councillors that the only other creditor in the mix was the Royal Bank of Scotland, whose securities take priority over those of SDT. Indications at that stage were that the proceeds from selling the property to T&N would fully reimburse RBS and would leave a shortfall of around £50,000 in loan repayments to the development trust. “This is not an insignificant hit to the public purse,” the minutes noted.

That meant, Mr Riise continued, that the company’s directors could not accept the offer “knowing that it would fail to meet all of their outstanding obligations”. But any further delay, he added, could only increase the likelihood of SDT recovering even less of its loan.

To further complicate matters, Judane is also to submit an insurance claim against the council, and particularly the planning department, for the predicament it is in. It relates to Judane having been on the brink of selling the factory to budget retailer Chris Hodge before SIC planners informed the firm that permission for a change of use would be required, having previously assured both Mr Hodge and Judane that that would not be the case.

Mr Miller said this week that work was still going on to hammer out an agreement between his firm and the council. “It’s between the lawyers, I really don’t even know that much about it myself,” he said, adding he did not want to make any comment about the bid from T&N Joinery.

It was decided on 20th May to ask council chief executive David Clark to open negotiations with the company to “optimise the return to the public purse” from the resolution of the company’s indebtedness while “respectful of any desire of the company to avoid bankruptcy”. Mr Clark subsequently declared an interest due to his close relationship with one of the directors and has delegated the task to Mr Grant and Mr Riise.

Mr Grant said there was no update to give at the moment, but he was hoping to be in a position to report back to the development committee on 1st October. “It’s quite a complex position with respect to legal positions and it’s taking a while to get the detail worked out. We’re looking at getting the best outcome for the council – that’s what we’ve focused on.”

West Side councillor Gary Robinson said the amount of time being taken to resolve the company’s affairs was becoming extremely frustrating. “It seems to be going incredibly slowly,” he said. “It’s taking much longer to resolve than we were led to believe.”

Mr Hodge also submitted an unsuccessful insurance claim for damages of around £1 million. He finally vacated the building in December last year after a lengthy dispute with the SIC and, latterly, the Miller family after he ceased making rent payments for the factory.