BHS faces collapse as last-ditch talks fail
BHS was on the verge of collapse tonight after eleventh-hour rescue talks failed, threatening 11,000 high street jobs.
The department store’s owner, Retail Acquisitions, a consortium led by former bankrupt Dominic Chappell, sought emergency funding to stay in business today.
But Mr Chappell told The Daily Telegraph this evening: “At the moment it doesn’t look good.”
He declined to comment further and said an announcement would be made later, amid growing fears that Retail Acquisitions was appointing administrators and that BHS stores may not remain open this week.
The apparent collapse of the 88-year-old chain comes just over a year after Arcadia boss Sir Philip Green sold BHS to Retail Acquisitions for £1.
It would be the biggest failure on Britain’s high streets since Woolworths went under eight years ago. Mike Ashley’s Sports Direct held talks about taking part in a rescue of BHS. However, the chances of the sportswear tycoon agreeing a deal became more remote as the weekend wore on.
The insolvency firm Duff & Phelps is likely to be hired to handle an administration. BHS is in crisis after it recently only managed to raise £52m from the sale of its Oxford Street store and its Sunderland site, rather than the £100m expected from disposals.
Retail Acquisitions was also negotiating a £60m loan from Gordon Brothers. A source said that deal had failed because of its unfavourable terms, which included paying millions of pounds in fees up front. It is understood the Gordon Brothers loan would have meant the debt BHS owes Sir Philip, thought to be between £35m and £40m, would have been subordinated. Despite that, a source close to Arcadia insisted it had been supportive of the Gordon Brothers loan as long as BHS raised the £100m it intended from property sales. Without the £100m, the deal was unworkable, the source said.
Speculation has been growing about BHS’s future ever since Sir Philip, who bought the business for £200m in 2000, sold it to a group of unknowns with limited retail experience. BHS has been loss-making for seven years and managers, led by chief executive Darren Topp, are struggling to keep it relevant to consumers.
BHS received a stay of execution last month when its creditors backed a company voluntary arrangement (CVA), allowing it to slash onerous rents at a host of stores. One BHS supplier said yesterday the CVA could have given the retailer 12 months of breathing space.
BHS has about £1.3bn in debts, including a £571m pension deficit. The retailer’s two pension schemes, which have 20,000 members, are already undergoing assessment to enter the Pension Protection Fund (PPF), a lifeboat for retirement plans of insolvent companies. This will lead to many members receiving a 10pc cut in their benefits.
Chris Martin, chairman of the BHS Pension Trustees, said the schemes would be unaffected by a BHS administration because they are in PPF assessment. He also questioned suggestions the pension deficit was an obstacle to a deal with Sports Direct because the retirement schemes are “effectively separated” from BHS. Malcolm Weir, of the PPF, said: “Members of the BHS pension schemes can be assured they are protected.”
Sports Direct and Gordon Brothers did not return requests for comment.