It is crunch time for one of the UK's best-known High Street names, the troubled department store, British Home Stores (BHS).
Troubled department store British Home Stores (BHS) has filed for administration.
Its creditors will vote on Wednesday on a deal it desperately needs to cut the rent bill for its 164 UK stores.
The retailer's debts top £1.3bn and include a pensions deficit of £571m. 11,000 jobs are now under threat.
The loss-making retailer currently has debts of over £1.3bn, including a pensions deficit of £571m.
BHS was bought by billionaire Sir Philip Green for £200m in 2000, but he sold it last year for just £1.
BHS was bought by billionaire Sir Philip Green for £200m in 2000, but he sold it last year for just £1.
It is now owned by Retail Acquisitions, a consortium of financiers, lawyers and accountants.
New owners Retail Acquisitions, a consortium of financiers, lawyers and accountants, have failed to raise £160m in fresh capital to reverse losses.
BHS - which has been loss-making for seven years - wants its creditors to agree to a Company Voluntary Arrangement (CVA).
"This has awful echoes of the demise of Woolworths," said Nick Hood, business risk advisor at Opus, an insolvency practice. "It's a disaster."
In effect, this is a compromise financial deal which depends on them accepting reduced rents.
Otherwise BHS is likely to end up in administration, placing the jobs of its 10,000 workers at risk.
Cutting rents
Cutting rents
BHS says a deal to cut its rental costs is vital in order to turn around the business.
BHS has lost money for each of the past seven years, and had asked creditors to agree to a Company Voluntary Arrangement (CVA).
"Although a difficult process to go through, this sets in motion the comprehensive updated turnaround plan," says its chief executive, Darren Topp.
In effect, this would have been a compromise financial deal that depended on the creditors accepting reduced rents.
The retailer has divided its stores into three groups - depending on their profitability.
BHS had previously said this effort would be vital to turn around the business. But news that the company is filing for administration shows those attempts have failed.
For 77 stores the rents it pays will remain unchanged, while for 47 stores BHS is "seeking a reduction in rent to market levels".
Global presence
Its least-profitable 40 stores will continue to trade for a minimum period of 10 months while talks go ahead "to reduce rents substantially", says the retailer.
BHS has operated an international franchise business for more than 30 years. Its current partners operate stores in more than a dozen countries across Europe, the Middle East and Central Asia.
At Wednesday's meeting BHS needs 50% of its landlords and 75% of its creditors to agree to the deal.
The retailer had recently divided its 164 UK stores into three groups - depending on their profitability.
However, Julie Palmer, retail analyst at insolvency experts Begbies Traynor, says BHS is confident it will get an agreement.
The company's turnaround plan called for the rents at 77 stores to remain unchanged, while for another 47 stores the company was "seeking a reduction in rent to market levels."
"It is passing the buck essentially to the landlords - with promise of a reduced but continued rental income for the next 10 months."
The company had hoped the 40 least-profitable locations would continue to trade for a minimum period of 10 months, while the discussions over "substantially" reduced rents continued.
Mr Topp said a deal would give BHS "a secure financial footing from which to grow and deliver sustainable profitability".
Pensions deficit
BHS is also in talks to address its pension deficits with the Pension Protection Fund, the government-supported rescue agency, as well as the Pensions Regulator and the BHS pension trustees.
BHS had also been in talks to address its £571m pension deficits with the Pension Protection Fund (PPF), the government-supported rescue agency, as well as the Pensions Regulator and the BHS pension trustees.
BHS insists that it continues to meet its pension payment obligations.
BHS recently maintained it would continue to meet its payment obligations for roughly 20,000 pension holders, and any new buyer of the company would be required to take on this significant deficit.
But in BHS's CVA submission, the retailer's directors are clearly hoping that the two pension schemes will be transferred into the PPF and that the company would have no further liability to fund it.
But in the BHS CVA submission, company directors indicated they were hopeful the two pension schemes would be transferred into the PPF, leaving the firm without further funding liabilities.
Yet even if landlords agree a deal, BHS warns that it needs extra funding to trade beyond 25 March and it is trying to raise £100m.
As recently as late March, BHS warned it needed extra funding to continue trading and was trying to raise £100m.
Analysis: Simon Jack, BBC business editor
They sold their Oxford Street lease in London for £30m but it was far less than they hoped for. And they also sold the lease on a Sunderland store to Sports Direct's Mike Ashley for £2m.
The Pension Protection Fund is entitled to vote today but, I have learned, will not.
Because it is by far the biggest creditor, its vote would make the other creditors votes irrelevant and so it is allowing the company and the landlords to sort out their issues first.
However, it has secured to right to call in its debt in six months' time if it's not happy with the way the pension liabilities are dealt with.
That would bankrupt the company and is essentially a sword of Damacles hanging over the company.
That will focus minds at the company and at the pension regulator who is in negotiations with former owner Sir Philip Green's Arcadia over making a contribution towards filling the hole.
BHS may win the day today but the pension question will have to be answered if the company is to survive.
BHS pension hole 'may swallow the firm'
'Tired and old-fashioned'
Crucially a deal does not mean that BHS's long term future is secured, says Julie Palmer.
"It buys them time, but the fundamental issues still remain."
With increasing competition from retailers like Primark and the internet, the challenge for BHS is to bring in shoppers, she says.
"What do BHS do, that nobody else does? If you look at homecare, Next do that better; and if you look at clothing, then Marks and Spencer do it better."
The problem, says Ms Palmer, is that the BHS brand "is tired and old-fashioned and has not kept pace with the times".
If BHS does eventually disappear, it would join its long-term rival Woolworths in failing to keep pace with a changing retail sector.
