Poundland’s owner Gordon Brothers seeks a £30m loan recovery as the discount chain files for administration, placing 12,000 jobs and 600 stores across the UK and Ireland in jeopardy while prospective buyers circle retail sites.
Poundland’s future hangs in the balance as the discount retail chain edges towards collapse, according to reporting by the BBC. Directors filed a notice of intention to appoint administrators in the High Court.
This gives the business 10 days of breathing space and pauses creditors from calling in debts while management searches for a rescue deal.
Funding Restrictions and the £30m Shareholder Loan Dispute
The insolvency process follows a split between Poundland’s management and its US-based owner, Gordon Brothers, which bought the struggling chain from Polish retail group Pepco in June last year for a nominal £1. This week, Poundland managing director Barry Williams wrote a memo to his 12,000 staff across 600 stores in the UK and Ireland, stating that Gordon Brothers had limited the company’s access to day-to-day operating funds. Williams described the situation as unexpected, unwanted and wholly avoidable
and added that this business simply does not deserve to go into any kind of administration.
Management’s preferred path was a takeover by the Irish firm Martin Property Group (MPG), which put forward a bid to take on the business as a going concern. However, that offer fell short of Gordon Brothers’ expectations. The US investment firm wants to recoup a £30m shareholder loan it inherited from previous owners, whereas the Martin Property Group offer was for £5m with the rest of the payment deferred. Following the decision to reject MPG’s solvent offer, three independent directors appointed earlier this month resigned with immediate effect.
AlixPartners Appointment and Retailer Interest in Store Parcels
Gordon Brothers has lined up AlixPartners as administrators. While a pre-pack administration remains an option to secure a new owner, the most likely outcome is that the business will be broken up and parcels of stores sold off to allow creditors to recover funds. Gordon Brothers is the main creditor, having extended £70m of loans to the business.
- Fortress, owner of Poundstretcher, is interested in taking on between 200 and 250 stores.
- Another large retailer is eyeing more than 100 other sites.
- More than half a dozen retailers, including Iceland, Lidl, and B&M, have expressed interest in parts of the store estate.
Gordon Brothers maintains that current employees may find employment with new store owners, noting that the sale process has surfaced formal and indicative offers for significant viable parts of the business.
Poundland Serves 20 Million Customers Annually
Founded in 1990 with a store in Burton-upon-Trent, Poundland serves around 20 million customers per year by selling low-cost everyday products, general merchandise, and fashion on local high streets. Poundland was bought by Polish retail group Pepco before Gordon Brothers acquired the chain in June last year for a nominal £1.