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geekypants
Beginner August 2008

Wrapit update

geekypants, 4 August, 2008 at 11:30 Posted on Planning 0 7

This is the email that I hoped I would never have to write - to tell you that we have today asked HSBC (as 1st charge holders) to call in Administrators to Wrapit plc.

Since HSBC's decision in May to retain our credit and Visa debit card income, we have fought hard to keep Wrapit in business and find a white knight to provide the necessary funds to enable the company to continue trading and implement its growth strategy. There have been several contenders but each one has fallen away in the face of the failure of HSBC to cooperate financially, or even provide an ongoing credit card processing facility. The last one fell away on Friday and therefore, with heavy hearts, but mindful of our responsibilities with regard to wrongful trading, the Board of Wrapit plc set the insolvency wheels in motion.

There are two questions that are probably in your mind and which I would like to answer. The first is 'How did Wrapit get into this situation which has put us through all this worry and potential loss?' and 'What happens now?'.

The short answer to the first question is that when big banks change policies, little companies sometimes get squashed. That is not the intention, it's just an unfortunate result. The complete answer is, of course, more complicated than that and, for those who are interested, I have added more about this in a postscript below.

Unfortunately, the answer to the question 'What happens now?' is not simple either. HSBC have accepted that they will be responsible for ensuring that all those people who bought gifts through Wrapit using either a credit card or a Visa debit card get a full refund, if they request one. So the only people who will lose out will be those who bought using a Switch/Maestro card or a cheque. These amount to about 20% of purchases. (American Express users will get a refund through AmEx.).

However, we have been working with our insolvency advisers, KPMG (who will also be the Administrators) and have established that the total cost to HSBC of funding these refunds will be £3.5m, plus a further £0.5 of administrative costs to deal with more than 60,000 refunds and the complications which arise when couples have ordered different gifts to those bought by their guests. A total, therefore, of at least £4.0m. However, to fund Wrapit to deliver every single gift bought to the couple for whom is was intended will only cost HSBC £3.0m.(Including the cost of processing the products and delivering them to you.)

The Wrapit staff and suppliers are ready to do this. The whole exercise would be mostly complete in three months and it would mean that you would get all of your gifts and your guests would not be put to any inconvenience. As it will also cost HSBC £1.0m less than the refund option, you would think that this would be the obvious way forward. I'm afraid to tell you that HSBC, true to form, don't agree. (It's not 'banking practice'.)

So, having precipitated the fall of Wrapit, HSBC now have it within their power to minimise the pain caused to 2,000 couples (and, probably, 100,000 of their guests) and ensure that no Wrapit customer loses any money - and, as things stand, they will not take it. The only thing that will get them to change their minds is public pressure. Pepita Diamand and I will try and get the media to put pressure on them and, if you agree that sending the gifts to the the couples for whom they were intended is the only sensible solution, then you might like to do what you can to let HSBC know.

You can write to Rob Clift at HSBC 165 Fleet St. or email him at ********@****.***. You could copy any email to *********@****.*** and *******@****.*** but the key to getting them to make the right decision will be getting this ludicrous situation to the attention of someone sufficiently senior at HSBC to be able to say 'Whatever the banker's handbook may say, in this situation we need to make the sensible decision.' The people identified above, who have been involved in the decisions taken to date are clearly more concerned with doing things correctly than with doing the right thing.

The Administrators will arrive later this morning and, from then on, it is unlikely that I will be able to write to you from a Wrapit email address. If you have any suggestions as to how we can achieve a satisfactory resolution to this very unsatisfactory situation, then you can contact me at *************@****.**.**.

I am so sorry for the distress that all this has caused, none of which is any fault of yours. Neither is it the fault of the Wrapit employees, franchises and consultants, who have been dealing with a nightmare situation for many weeks and who have been working with little prospect of pay for the last month. They have been fantastic. Please don't take it out on them.

If we can get HSBC to help them get your gifts to you, then we will, at least have made the best of a bad job. We look forward to your help.

Yours


Peter Gelardi | Managing Director | E: pgelardi@wrapit********@******.**.**

Wrapit plc | Delta Park, Smugglers Way, London, SW18 1EG | www.wrapit.co.uk

Winner of the Management Today Award for Service Excellence

POST SCRIPT

For those who are interested to know how a perfectly good business could be brought down by a bank whose officers are not trying to be difficult, but who are just 'following orders', here is the story.

In February 2008 Wrapit was going through the due diligence process related to a VC investment of £2.2m in the company. During this process, HSBC realised that its exposure to possible credit card chargebacks, if Wrapit were to fail, was much bigger than they had thought. So, instead of doing what they could to ensure that the business was adequately funded, so that there was no risk of company failure, they panicked and started retaining our credit card income. The justification was that this would 'protect' them in case we ran into financial difficulty. They also made it clear to potential investors that they would not continue to provide us with credit card processing facilities, at any price, because it was now policy to avoid businesses like Wrapit, where the potential chargeback risk was high.

Of course, this had the effect of ensuring that we encountered the very situation that they feared and although we attracted interest from several VC prepared to make the investment to extract us from this situation, they were ultimately defeated by the very tight timeframe that our lack of cash imposed and, once the word of our difficulty got out, the damage caused to the business.

The irony is that HSBC, by 'following banking procedures' have not only ensured that Wrapit failed, but their actions could not have been better implemented or timed to ensure that their liability is as big as it possibly could be.

I'm off to have a wee cry now. I know its not the end of the world, but such a pain 3 days before the wedding.

7 replies

Latest activity by geekypants, 4 August, 2008 at 12:16
  • ashmegdj
    Beginner August 2009
    ashmegdj ·
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    Sorry didn't want to r&r. ?

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  • sdaisy22
    Beginner October 2008
    sdaisy22 ·
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    How horrid for you. At least it seems either you will get your gifts or your guests will get their money back, but still, this isn't something you want to be worrying about just before your wedding. ?

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  • geekypants
    Beginner August 2008
    geekypants ·
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    Its just the timing that is so crap right now.

    And we probably won't know before the wedding if getting the gifts is a possibility.

    I hope nobody at the wedding is insensitive enough to bring it up. It really would put such a dampener on things.

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  • bluewater
    Beginner August 2009
    bluewater ·
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    Am so so sorry about this - have a ?. i hope your family and friends manage to get their money back, or it comes to some sort of a positive resolution xxx

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  • sdaisy22
    Beginner October 2008
    sdaisy22 ·
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    Might it be worth getting bridesmaids / ushers to mention to people that you don't want it talked about? Or sending a brief email to guests beforehand? Because I can imagine that people might well say something - just out of concern for the two of you really, so if someone saying something to you will upset you on the day, it might be worth taking preventative measures beforehand?

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  • wonderstuff
    Beginner August 2009
    wonderstuff ·
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    ? So sorry to read this.

    What a pain (massive understatement) 3 days before the wedding!

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  • R
    Beginner
    Rach123 ·
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    What a nightmare. We used wrapit nearly 3 years ago and they were brilliant.

    Don't let things beyond your control spoil your day, hard to do, but it really won't matter on the day, trust me, everything else pales into insignificance.

    Have a wonderful day

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  • geekypants
    Beginner August 2008
    geekypants ·
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    Thanks Rach123, your comment means a lot and I know you're right.

    Hopefully I'll be able to get in touch with most people today and tomorrow. I'll have BM, ushers and bridemaid ready to answer questions, and Dad says he'll mention something in his speech.

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