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BHS heading for administration as rescue deal fails BHS heading for administration as rescue deal fails
(35 minutes later)
The owner of BHS has warned staff the struggling retailer will go into administration on Monday after failing to agree a last-minute deal to keep the business afloat. The owner of BHS has told staff the struggling retailer will go into administration on Monday after failing to agree a last-minute deal to keep the business afloat.
In a letter to its 11,000 employees last night, BHS owner Dominic Chappell said: “It is with a deep heart that I have to report, despite a massive effort from the team, we have been unable to secure a funder or a trade sale.” Dominic Chappell effectively confirmed that the chain will become the biggest high street name to fold since Woolworths failed in 2008.
The restructuring firm Duff & Phelps is set to be named as administrators, and is expected to try to find a buyer for the business as a going concern. Chappell indicated in the letter that staff wages for this month would be paid by the administrators. In a letter to 11,000 employees on Sunday night, Chappell said: “It is with a deep heart that I have to report, despite a massive effort from the team, we have been unable to secure a funder or a trade sale.”
Chappell led the Retail Acquisitions consortium which bought BHS from Sir Phillip Green for £1 last year, but has since struggled with falling sales at the same time as it was burdened with a hefty rent bill and a huge pension deficit. The restructuring firm Duff & Phelps is set to be named as administrators and is expected to try to find a buyer for the business as a going concern. Chappell indicated in the letter that staff wages for this month would be paid by the administrators.
Chappell led the Retail Acquisitions consortium which bought BHS from Sir Phillip Green for £1 last year but which has since struggled with falling sales at the same time as it was burdened with a hefty rent bill and a huge pension deficit.
Related: How Britain fell out of love with BHS - timelineRelated: How Britain fell out of love with BHS - timeline
His letter concluded: “I would like to say it has been a real pleasure working with all of you on the BHS project, one I will never forget, you all need to keep you heads held high, you have done a great job and remember that it was always going to be very very hard to turn around.” His letter concluded: “I would like to say it has been a real pleasure working with all of you on the BHS project, one I will never forget, you all need to keep you heads held high, you have done a great job and remember that it was always going to be very, very hard to turn around.”
The collapse of BHS will be the biggest failure on the high street since the demise of Woolworths in 2008, providing the government with another headache as it coincides with the threat to thousands of jobs in the steel industry. The collapse of BHS means another headache for the government as it coincides with the threat to thousands of jobs in the steel industry.
John Hannett, general secretary of the shopworkers’ union Usdaw, said the new was “devastating” for staff. He told the BBC:“The uncertainty is really difficult for people, who today are waking up to the news, watching the news reports, listening to me, listening to others and thinking ‘what does it mean for me?’ And I think what we want is a constructive dialogue, about what are the remedies, what are the options, is there potential buyers? Most importantly remember this is about people it’s not just about economics.” John Hannett, general secretary of the shopworkers’ union Usdaw, said the new was devastating for staff. He told the BBC: “The uncertainty is really difficult for people, who today are waking up to the news, watching the news reports, listening to me, listening to others and thinking, ‘What does it mean for me?’
“And I think what we want is a constructive dialogue, about what are the remedies, what are the options, are there potential buyers? Most importantly, remember this is about people, it’s not just about economics.”
Nick Hood, business risk adviser at the insolvency practitioners Opus, told the Today programme: “Retail these days is all about heavy investment in staying up with the trend, online offerings, mobile offerings. None of this has happened at BHS.”Nick Hood, business risk adviser at the insolvency practitioners Opus, told the Today programme: “Retail these days is all about heavy investment in staying up with the trend, online offerings, mobile offerings. None of this has happened at BHS.”
The demise of BHS comes just a month after it appeared to secure its short-term survival by persuading landlords to cut the rent it pays by up to 75% at 87 shops. However, even as landlords, suppliers and creditors voted overwhelmingly in favour of the survival plan, known as a company voluntary arrangement (CVA), BHS warned that it need to find £100m to continue trading. The demise of BHS comes just a month after it appeared to secure its short-term survival by persuading landlords to cut its rent by up to 75% at 87 shops. However, even as landlords, suppliers and creditors voted overwhelmingly in favour of the survival plan, known as a company voluntary arrangement (CVA), BHS warned that it needed to find £100m to continue trading.
It attempted to raise the money with £30m of property sales, a new £60m loan from private equity firm Gordon Brothers and £10m from changing the terms of its agreement with suppliers. On top of this, however, it needed to raise another £70m from selling property to pay off a separate loan from Grovepoint.It attempted to raise the money with £30m of property sales, a new £60m loan from private equity firm Gordon Brothers and £10m from changing the terms of its agreement with suppliers. On top of this, however, it needed to raise another £70m from selling property to pay off a separate loan from Grovepoint.
But it failed to raise enough cash from the property sales and the deal with Gordon Brothers fell apart. Talks with Gordon Brothers were already complex because Green needed to release security he held over BHS’s assets in order for the loan to go through. But it failed to raise enough cash from the property sales and the deal with Gordon Brothers fell apart. Talks with Gordon Brothers were already complex because Green needed to release security he held over BHS’s assets for the loan to go through.
Green, who bought BHS for £200m in 2000, is understood to have been ready to agree to the loan, but the funds from Gordon Brothers were not enough without the property deals and the strict terms led to the talks collapsing.Green, who bought BHS for £200m in 2000, is understood to have been ready to agree to the loan, but the funds from Gordon Brothers were not enough without the property deals and the strict terms led to the talks collapsing.
Separately, Green has held talks with the Pension Regulator about injecting cash into the company’s pension scheme, which has a £571m deficit. He is thought to have offered £40m in cash and a £40m loan secured against BHS’s assets. Separately, Green has held talks with the pension regulator about injecting cash into the company’s pension scheme, which has a £571m deficit. He is thought to have offered £40m in cash and a £40m loan secured against BHS’s assets.
Weekend talks with Mike Ashley’s Sports Direct International also appear to have come to nothing.Weekend talks with Mike Ashley’s Sports Direct International also appear to have come to nothing.
Chief executive Darren Topp said on Sunday that £60m needed to be found urgently to keep the company 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.” BHS’s chief executive, Darren Topp, said on Sunday that £60m needed to be found urgently to keep the company 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.”