About 180 employees of U-Right International (0627) will lose their jobs and 10 to 20 of its stores in Hong Kong will close - but the liquidator is confident a white knight will ride to the rescue of the clothing retailer.
But while the casualwear chain may be saved, more businesses are likely to face liquidation as the ongoing global financial tsunami forces creditors to become less lenient, according to industry watchers.
Provisional liquidator Edmund Yeung Lui-ming of Deloitte Touche Tohmatsu said yesterday the layoffs will be made up of 100 administrative and 80 retail employees.
He blamed the store closures on underperformance.
Yeung said he is talking to two or three potential buyers. He said administrative staff are not owed wages, and less than HK$1 million in pay and commissions is due to retail staff.
The cash to pay retail staff will be raised through cut-price sales at stores.
U-Right's rags-to-riches-to-rags story began in 1979 when 19-year-old Leung Ngok moved to Hong Kong from the mainland.
Four years later, he founded U-Right, which grew from a single shop to become a listed company with 95 retail outlets in Hong Kong and 516 in Macau and the mainland.
Just three years ago Leung was riding high, donating 500,000 yuan (HK$567,000) to his former school, the No1 Middle School of Macheng in Hubei, to build a science facility.
His wife, Yim Yuk-lam, the operations general manager, is also a director of Po Leung Kuk.
Yeung said the company failed because of overexpansion, but he is optimistic a deal could be reached with an investor within two to three weeks, before the company is liquidated.
Some U-Right outlets in Hong Kong were closed yesterday for inventory checks, but most are expected to resume operations. Those stores that remained open were selling products for as low at HK$10 or offering discounts of up to 80 percent.
A staff member at U-Right's Yau Ma Tei outlet said she had not received any notification about a closedown. "Many people are competing for jobs now. I am worried I will lose mine and not be able to find another," she said.
The Labour Department has set up three hotlines 2928-7112, 2928-7002 and 2150-6397 for employees who want to apply for assistance from the Protection of Wages on Insolvency Fund.
It has also set up special service counters at all labor relations division offices to help employees pursue compensation. As of 5pm, the department had received 155 inquires.
Hong Kong Department Stores and Commercial Staff General Union vice chairman Tang Cheung-sing said more retailers may close over the next few months as the impact of the financial tsunami starts to bite, but he said the period between October and the Lunar New Year is traditionally the peak season for retail outlets.
He said it is possible many stores will try to stay open at least until the season ends.
U-Right owed banks, excluding suppliers, about HK$1.2 billion. One of the creditors, Deutsche Bank, has applied to wind up the company.
