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BHS collapses into administration as rescue deal fails BHS collapses into administration as rescue deal fails
(35 minutes later)
BHS has officially collapsed into administration after failing to agree a last-minute deal to rescue the department store chain.BHS has officially collapsed into administration after failing to agree a last-minute deal to rescue the department store chain.
Related: BHS to put 11,000 jobs at risk with 'disastrous' administration - business live
The collapse of the retailer, which employs 11,000 people, is the biggest failure on the high street since the demise of Woolworths in 2008.The collapse of the retailer, which employs 11,000 people, is the biggest failure on the high street since the demise of Woolworths in 2008.
Duff & Phelps has been appointed as administrators and will keep stores open as they try to find a buyer for the department store chain. Duff & Phelps has been appointed as administrators and will keep stores open as it tries to find a buyer for BHS.
In a statement, Duff & Phelps said: “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. The government is expected to make a statement on the failure of the 88-year-old retail group in parliament this afternoon, either through Sajid Javid, the business secretary, or Anna Soubry, the business minister.
“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.” Related: BHS to put 11,000 jobs at risk with 'disastrous' administration - business live
Staff were told on Monday morning that BHS had called in Duff & Phelps as administrators. The administrators are understood to have had more than 30 expressions of interests in buying BHS already. In a statement, Duff & Phelps said: “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.
The collapse of the 88-year-old retailer presents another problem for the government as it attempts to save thousands of jobs in the steel industry. BHS has failed to secure emergency funding that it needed to pay wages and its rent. “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.”
Sajid Javid, the business secretary, said the government is in talks with BHS management about the collapse of the retailer. Staff were told on Monday morning that BHS had called in Duff & Phelps as administrators. It is understood to have had more than 30 expressions of interest in buying BHS by midday on Monday.
Javid said on Twitter: “Worrying news for #BHS workers this morning. Government is in close contact with the company’s management at this difficult time.” The collapse of BHS presents another problem for the government as it attempts to save thousands of jobs in the steel industry. BHS had failed to secure emergency funding that it needed to pay wages and rent.
Javid said the government is in talks with BHS management about the retailer’s collapse.
Dominic Chappell, the owner of BHS, said in a letter to 11,000 employees on Sunday night: “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, the owner of BHS, said in a letter to 11,000 employees on Sunday night: “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 indicated in the letter that staff wages for this month would be paid by the administrators. He indicated in the letter that staff wages for this month would be paid by the administrators.
Related: How Britain fell out of love with BHS - timelineRelated: How Britain fell out of love with BHS - timeline
Chappell led the Retail Acquisitions consortium which bought BHS from Sir Phillip Green for £1 last year. However, BHS has struggled with falling sales at the same time as a hefty rent bill and a huge pension deficit. Chappell led the Retail Acquisitions consortium that bought BHS from Sir Phillip Green for £1 last year. However, the retailer has struggled with falling sales while facing a hefty rent bill and a huge pensions deficit.
Chappell’s 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.” Chappell’s 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 your heads held high, you have done a great job and remember that it was always going to be very, very hard to turn around.”
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?’ John Hannett, the general secretary of the shopworkers’ union Usdaw, said the news was devastating for staff. “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?’, he told the BBC.
“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.”“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.” At the retailer’s store in Oxford Street, central London, customers were waiting outside before it opened as usual. Nicolette Kadzeya, 39, who was there with her three children, was looking to exchange an unwanted item. “I think the problem with BHS is that this branch is very up to date, but if you go to the branch in Surrey Quays, it’s as if you have gone back in time. It’s like you’ve gone back to the mid-90s,” she said.
At the retailer’s store in London’s Oxford Street, customers were waiting outside before it opened as usual despite the looming administration. Nicolette Kadzeya, 39, who was there with her three children, wanted to exchange an unwanted item. She said: “I think the problem with BHS is that this branch is very up to date but if you go to the branch in Surrey Quays it’s as if you have gone back in time. It’s like you’ve gone back to the mid-90s.
“Some of the branches which are outside London are not that well maintained. It’s a bit old fashioned as well. They are good for school shoes but it’s not really up to date.”“Some of the branches which are outside London are not that well maintained. It’s a bit old fashioned as well. They are good for school shoes but it’s not really up to date.”
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. The demise of BHS comes a month after the retailer appeared to have secured 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, 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, it needed to bring in 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 for the loan to go through. But it failed to raise enough cash from property sales and the deal with Gordon Brothers fell apart. Talks with the private equity firm were already complex, because Green needed to release security that 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. Talks over the weekend with Mike Ashley’s Sports Direct also appear to have come to nothing.
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.” BHS’s chief executive, Darren Topp, said on Sunday that £60m needed to be found urgently to keep the company afloat. “What was on the table wasn’t sufficient and we have been working in the last few days to fill the gap,” he said.