UK department store chain BHS, aka British Home Stores, has officially gone into administration and appointed the firm of Duff & Phelps as administrators.
The failure to achieve a last-minute rescue deal for the retailer means its 164 outlets and 11,000 jobs are now threatened. Although Duff & Phelps will keep the stores open as they seek a possible buyer for BHS, the chain has not secured the emergency funding needed to pay wages and rent.
A statement from the administrator read: “The group has been undergoing restructuring and, as has been widely reported, the shareholders have been in negotiations to find a buyer for the business. These negotiations have been unsuccessful. In addition property sales have not materialised as expected in both number and value.
“Consequently, as a result of a lower than expected cash balance, the group is very unlikely to meet all contractual payments. The directors therefore have no alternative but to put the group into administration to protect it for all creditors. The group will continue to trade as usual whilst the administrators seek to sell it as a going concern. Further announcements will be made as appropriate in due course.”
Reports suggest that Duff & Phelps has already received more than 30 expressions of interests from potential buyers of the UK retailer, which has traded since 1928
BHS’s owner wrote to employees at the weekend confirming that his team had been unable to secure a funder or a trade sale. He indicated that staff wages for this month would be paid by the administrators.
Chappell led a consortium, Retail Acquisitions, which bought BHS last year from previous Sir Phillip Green for a token £1. However, BHS sales continued to decline as it faced a substantial rent bill and large pension fund deficit.
However, last month BHS appeared to have won a reprieve when it persuaded landlords to reduce the rent by up to 75% at 87 of its stores. However, even as landlords, suppliers and creditors gave their support to a company voluntary arrangement (CVA) to provide for continued trading, BHS warned that it needed to find a further £100m in funding.
It attempted to raise the money with £30m of property sales, a new £60m loan from private equity (PE) firm Gordon Brothers and £10m from revising the terms of its agreement with suppliers. However, additionally it needed to raise another £70m from selling property to pay off a separate loan from investment firm Grovepoint, while the property sales failed to raise sufficient cash and the deal with Gordon Brothers fell through
BHS’s chief executive (CEO), Darren Topp, announced at the weekend that the company urgently needed a £60m capital injection to stay afloat. He said: “What was on the table wasn’t sufficient and we have been working in the last few days to fill the gap.”
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