A report by Duff & Phelps, which was appointed to supervise the receivership of Direct Golf, has provided some details on the lead-up to Sports Direct's acquisition of the golf retailer's assets last month. SDI (formally Sportsdirect.com Retail Limited, in this instance) bought 25 percent of the retailer last year and invested £2.25 million (€3.19m-$3.37m) as part of a new £10 million (€14.2m-$15.0m) working capital facility. The audited statutory accounts for the year until the end of September 2014 found a retained profit after tax of about £107,000 (€151,834-$160,853). Trading results reported by Direct Golf for the months to February 2015 were strong, and SDI advanced another £1.5 million (€2.1m-$2.3m) from the facility. But in May, the retailer's former finance director left the business, while the audit for the year until September 2014 was being completed, and external auditors were engaged to finalize April management accounts. The Duff & Phelps report alleges that “substantial accounting errors” were found in this process, which ultimately resulted in a restatement of the accounts to a loss of £4.7 million (€6.7m-$7.1m) for the year until the end of September 2014, while the April figures were restated down by £1.4 million (€2.0m-$2.1m). A review is being carried out of this issue. It was apparently this accounting review that led SDI and John Andrew, Direct Golf's founder and 75 percent shareholder, to consult insolvency specialists. Duff & Phelps took control of the insolvency (apparently due to the debenture granted to SDI in exchange for the finance facilities), while Andrew and two others were removed as directors. The business and assets of Direct Golf UK were sold to an entity controlled by SDI for £299,994 (€425,694-$450,981) on Oct. 19, in a deal safeguarding 160 jobs, according to the report. It appears unlikely that a debt collection and asset sell-off will suffice to fulfill unsecured creditor claims reaching £13.97 million (€19.8m-$21.0m).

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