Kadhim Shubber and Robert Smith in London December 8 2022
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.
The risks were laid bare this year as Thurrock Council in Essex revealed enormous losses from a string of investments it made into solar energy projects. The UK government in September stripped Thurrock’s control of its own finances.
Warrington’s latest draft accounts show that it had £445mn of commercial and housing association loans outstanding as of March 2022, of which the loan to Moulding was the biggest at 28 per cent of the total at £125mn. The loan is labelled in the accounts as “Hut Group Icon 3 Holding”.
The council extended the credit line to a special purpose vehicle called Icon 3 and secured the facility against a portfolio of properties including warehouses and hotels run by THG. The funds were to be invested in extending and refurbishing the properties.
The Labour-run authority approved the facility during a confidential session of its cabinet on October 12, 2020. Warrington council’s deputy leader, Cathy Mitchell, submitted a report to the meeting that detailed the proposal and recommended that the council approve the £202mn facility from which “numerous group companies of THG” would draw funds.
Warrington’s loan was double the size of any of its existing loan facilities, which were primarily to housing associations, and almost 10 times bigger than any other non-housing commercial loan it had extended.
A day after the cabinet approved the loan, Icon 3 notified the UK’s Companies House disclosing that THG transferred the entity to Moulding personally the previous month. THG’s lawyers said the statutory filing simply recorded what Warrington knew already.
The profitability of Moulding’s property holdings is opaque as he controls the companies through a Guernsey parent entity called Moulding Group. Guernsey does not require companies to publish annual accounts.
Moulding’s personal wealth is largely tied to THG. He owns around 22 per cent of the company, a stake currently valued at £165mn, and he receives rents from THG. In 2021, THG paid his property business over £20mn.
THG shares have fallen 90 per cent since its debut on the public markets, as weaker consumer spending and rising inflation have pressured its core ecommerce business.
The report says that CBRE, the real estate services firm, had advised on the loan structure and carried out due diligence on THG. CBRE also helped to administer the facility, according to the report. CBRE did not respond to a request for comment.
CBRE previously advised on a loan facility THG received from Trafford Council, the report says. It adds that “The Hut Group” chose Warrington over “similar financing offers” from “large financial institutions” in part because of THG’s “good relationship . . . with CBRE”.
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Kadhim Shubber and Robert Smith in London December 8 2022
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.
The risks were laid bare this year as Thurrock Council in Essex revealed enormous losses from a string of investments it made into solar energy projects. The UK government in September stripped Thurrock’s control of its own finances.
Warrington’s latest draft accounts show that it had £445mn of commercial and housing association loans outstanding as of March 2022, of which the loan to Moulding was the biggest at 28 per cent of the total at £125mn. The loan is labelled in the accounts as “Hut Group Icon 3 Holding”.
The council extended the credit line to a special purpose vehicle called Icon 3 and secured the facility against a portfolio of properties including warehouses and hotels run by THG. The funds were to be invested in extending and refurbishing the properties.
The Labour-run authority approved the facility during a confidential session of its cabinet on October 12, 2020. Warrington council’s deputy leader, Cathy Mitchell, submitted a report to the meeting that detailed the proposal and recommended that the council approve the £202mn facility from which “numerous group companies of THG” would draw funds.
Warrington’s loan was double the size of any of its existing loan facilities, which were primarily to housing associations, and almost 10 times bigger than any other non-housing commercial loan it had extended.
A day after the cabinet approved the loan, Icon 3 notified the UK’s Companies House disclosing that THG transferred the entity to Moulding personally the previous month. THG’s lawyers said the statutory filing simply recorded what Warrington knew already.
The profitability of Moulding’s property holdings is opaque as he controls the companies through a Guernsey parent entity called Moulding Group. Guernsey does not require companies to publish annual accounts.
Moulding’s personal wealth is largely tied to THG. He owns around 22 per cent of the company, a stake currently valued at £165mn, and he receives rents from THG. In 2021, THG paid his property business over £20mn.
THG shares have fallen 90 per cent since its debut on the public markets, as weaker consumer spending and rising inflation have pressured its core ecommerce business.
The report says that CBRE, the real estate services firm, had advised on the loan structure and carried out due diligence on THG. CBRE also helped to administer the facility, according to the report. CBRE did not respond to a request for comment.
CBRE previously advised on a loan facility THG received from Trafford Council, the report says. It adds that “The Hut Group” chose Warrington over “similar financing offers” from “large financial institutions” in part because of THG’s “good relationship . . . with CBRE”.