British Seafood has gone into administration after banks withdrew trade credit, dealing a blow to private equity group 3i, which bought a 28.5 per cent stake in the company two years ago.

The UK-based company's business model relied on trade finance for working capital, but faced liquidity constraints after banks reportedly refused to issue letters of credits (L/Cs).

L/C reliance

British Seafood, which imports fish from Asia, went into administration on 19 February 2009.

Analysts appear to agree that the company's reliance on trade finance and the consequent dearth of L/Cs precipitated the company's collapse.

Fundamentally sound

While some of the company's subsidiaries had gone into administration, Grimsby-based Five Star Fish, which British Seafood acquired three years ago, continued trading.

According to private equity investor 3i, which had a stake in the company valued at £81 million in September 2009, said the firm failed because of lack of bank support.

"This is a fundamentally good business," 3i told the Financial Times newspaper.

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