A council in Cheshire agreed to lend the founder of The Hut Group (THG PLC) GBP150mln shortly after it was listed on the stock market with a valuation of more than GBP5bn, according to reports today.
Warrington Council made the loan in October to a company indirectly controlled by Matt Moulding, who is also THG’s chairman and chief executive as well as its founder, with three drawdowns subsequently totalling GBP151mln.
According to the report, the amount was ten times the size of the average corporate loan made by the council and one of the largest advances the local authority has ever made.
In the prospectus for last year’s listing, it was revealed that many of the properties used by THG were owned by Moulding and rented back to the company, a practice he defended at the time but raised some governance queries.
Moulding controlled an estimated 25% of the business stake when it floated last September and also has a golden share that stops the company from being taken over.
Alongside the limited free float in the shares, this prevents the company from being included in the FTSE100 index in spite of it easily being large enough.
According to the Financial Times report, the Warrington loan money was used to acquire properties around Manchester Airport.
In response, the council said lending money was “not a new venture for Warrington and is a practice that has been evidenced as being well established for some time in local government across the UK”.
“Our objective is to secure good quality jobs for local residents,” it added.
THG supplies a range of lifestyle, wellness and beauty brands through its e-commerce platform and has ridden the growth in online shopping to notch up impressive sales growth.
The shares are worth 617p currently, against a 500p float price, valuing the business at GBP7.5bn.