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Poundland cannot buy new stock as UK rescue clock runs to Thursday
The BBC reports Poundland cannot buy new stock after owner Gordon Brothers froze about £50m, with a creditor-protection notice lasting until Thursday.
- New headline Was: “Poundland unable to buy new stock as fears over collapse grow”
- Our desk filed its story
UK discount chain Poundland cannot buy new stock to fill shelves after its American owner Gordon Brothers blocked access to cash in its bank accounts, the BBC reported Monday1.
About £50m has been frozen, the BBC said it understood, leaving the company's roughly 600 shops running down inventory1. Poundland has filed a notice of intention to appoint administrators, which the BBC said protects it from creditors until Thursday1.
Gordon Brothers bought Poundland for £1 last June and rejected a takeover bid that the BBC said could have saved thousands of jobs now at risk1. The BBC said Gordon Brothers had been approached for comment1.
A source told the BBC that access to funds was limited because of tension between Gordon Brothers' dual role as creditor and shareholder, but that a relaxation of funds was expected in the next two days1. One unnamed insider described the chain as "running on fumes," according to the BBC1.
Last week, Poundland boss Barry Williams told staff like-for-like sales, excluding new store openings, were up 11.4% in a week that included Halloween and £1.5m ahead of budget, the BBC reported1. He said the business made a profit of £18.1m in the year to September after losses of £68m the year before; the latest annual accounts have yet to be audited, the BBC said1.
Gordon Brothers offered a different picture, saying the chain remains "challenged and vulnerable to any potential downturn in future trading," according to the BBC1. It said it had provided significant funding since acquiring the business and had made £18m from debt interest and other fees and charges, the BBC reported1.
On Wednesday, Gordon Brothers executives are due to appear before the Business Select Committee, with MPs probing whether they are pursuing a solvent rescue of a business with 11,000 employees, the BBC said1. The session is private because commercially sensitive talks with bidders continue, according to the BBC1.
If there is a prospect of a solvent deal, Thursday's 10-day moratorium could be extended; otherwise Poundland could enter administration and be broken up, the BBC reported1. A source familiar with the sales process told the BBC that London-based Xyra Group was making significant progress and could now be the front-runner1.
Even a whole-business sale would not guarantee that a new owner would keep every store, the BBC said, though suppliers would prefer that to hundreds of sites being sold off1. The BBC said Poundstretcher, Tesco and B&M have shown interest in picking up stores1.