Credit insurer cuts cover for Boohoo suppliers
According to The Times, some suppliers have even had their coverage level cut to zero, effective from September.
Credit insurance is essential to the retail supply chain, protecting suppliers if customers hit bankruptcy between the point of accepting an order and suppliers taking payment. If this were to happen, suppliers typically demand payment upfront, negatively impacting the retailer’s cash flow.
A spokesperson for Boohoo told the Times: "With the credit insurance capacity less than 50% utilised, we wouldn’t expect any real impact from the reduction".
As of February, Boohoo had a net cash position of £5.9 million and access to a £325 million credit facility.
This follows the news of credit insurers slashing the cover for ASOS to zero in May. Since then, the e-tailer has had to raise £75 million from shareholders and enter into £275 million of new debt facilities with specialist lender Bantry Bay Capital Limited.
These new facilities have replaced the £350 million revolving credit facility, which was due to expire in November 2024 following the amendment and extension announced alongside the company’s interim results on 10 May 2023.