The financial fallout from the collapse of JD Classics last September further escalated this week, when the administrators of the failed business sued its founder Derek Hood for £64 million.
London-based Alvarez & Marsal Europe were appointed as administrators to tidy up the legal affairs of JD Classics and to extract as much value as possible from the sale of the business and assets on behalf of creditors, which included private equity company Charme Capital, other investors and banks.
According to a report on Sky News, lenders including Lloyds Bank, which provided much of JD Classics’ finance, stood to lose up to £25m from the collapse. But many smaller-scale businesses and individuals were also affected.
Legal papers related to the court action by the administrators are understood to say that the turnover and assets of JD Classics were inflated by over-optimistic valuations of the cars stocked at the dealership.
Examples given include a Jaguar D-Type bought and sold multiple times to record turnover of £24m and profits of £7.25m, even though the car was worth only £650,000, according to a valuation by RM Sotheby’s.
An XK SS was valued at £11.5m – considerably above its true value – while a replica Ford GT40 MkI was incorrectly described as original. As a result, the GT40’s true value of £2.52m was overstated to £5.5m.
JD Classics, based in Maldon, Essex, became a major player in the collector car market having been founded by Hood and built up over 30 years. But the business started to unravel in April last year when a customer successfully sued Hood for £9m in the High Court.
The case hinged on Hood’s relationship with Michael Tuke in a series of complicated deals with multiple cars changing hands, some being bought by Tuke and others part-exchanged back to JD Classics. Although the cars were in stock at JD Classics, some weren’t owned by JD Classics, while others were.