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Poundland 'could run out of money next week' without rescue deal Poundland rescue deal saves firm from administration
(about 1 hour later)
Poundland has already announced plans to close 68 storesPoundland has already announced plans to close 68 stores
Poundland could run out of money by the end of the week if a restructuring plan is not approved. Poundland has avoided collapsing into administration after its turnaround plan was approved days before the chain was due to run out of money.
The budget chain has asked a High Court judge to approve a deal which would save it from having to go into administration. The budget retailer had asked the judge to approve a deal, saying it would have run out of cash without it by 7 September.
Poundland has around 14,700 staff and operates about 800 stores. It previously announced plans to close 68 shops after it was sold to a subsidiary of a private equity firm for £1, putting about 1,000 jobs at risk. Poundland has around 14,700 staff and operates about 800 stores. It has previously announced plans to close 68 shops after it was sold to a subsidiary of a private equity firm for £1, putting about 1,000 jobs at risk.
The High Court heard on Tuesday that the turnaround plan would see a significant injection of cash into the company.The High Court heard on Tuesday that the turnaround plan would see a significant injection of cash into the company.
Barristers for Poundland said in a written submission that the chain's liquidity forecasts show it will run out of cash by 7 September.
Tom Smith KC, for Poundland Limited, wrote that the retailer's financial position had "significantly deteriorated during the last two years" and that it had "performed poorly in a difficult retail and economic environment".Tom Smith KC, for Poundland Limited, wrote that the retailer's financial position had "significantly deteriorated during the last two years" and that it had "performed poorly in a difficult retail and economic environment".
He said if the restructure was not approved, the company's directors would likely place it into administration by Friday. He said if the restructure had not been approved, the company's directors would likely have placed it into administration by Friday.
Poundland, which was founded in Staffordshire in 1990, announced plans to shut 68 stores in June after being sold by the Polish group Pepco to Peach Bidco, a subsidiary of private equity firm Gordon Brothers, for £1.Poundland, which was founded in Staffordshire in 1990, announced plans to shut 68 stores in June after being sold by the Polish group Pepco to Peach Bidco, a subsidiary of private equity firm Gordon Brothers, for £1.
The company reported a pre-tax loss of £35.7m in the last financial year. Earlier this year, it said a rise in employer National Insurance contributions would add to its difficulties.The company reported a pre-tax loss of £35.7m in the last financial year. Earlier this year, it said a rise in employer National Insurance contributions would add to its difficulties.
Speaking in court, Mr Smith said a "very significant amount of new money" would be injected into the company through its turnaround plan.Speaking in court, Mr Smith said a "very significant amount of new money" would be injected into the company through its turnaround plan.
"The plan will release a further £60m of funding, and that is in addition to the £30m that has already gone in following the purchase that took place on June 12," he said."The plan will release a further £60m of funding, and that is in addition to the £30m that has already gone in following the purchase that took place on June 12," he said.
"So, in effect, if you add everything up, Gordon Brothers is putting in £90m.""So, in effect, if you add everything up, Gordon Brothers is putting in £90m."
Poundland originally sold all of its products for less than £1, but since 2017 it has sold a growing number of goods for more than a pound.Poundland originally sold all of its products for less than £1, but since 2017 it has sold a growing number of goods for more than a pound.
In January, it added 900 products to its "£1 or less" range amid poor sales numbers.In January, it added 900 products to its "£1 or less" range amid poor sales numbers.
As well as the store closures, Poundland is also planning to close its frozen and digital distribution site in Darton, South Yorkshire, later this year, and another warehouse at Springvale in Bilston, West Midlands, early next year. As well as the store closures, Poundland plans to close its frozen and digital distribution site in Darton, South Yorkshire, later this year, and another warehouse at Springvale in Bilston, West Midlands, early next year.
It will also stop selling products online, leading to the loss of 350 warehouse jobs. It also stopped selling products online, leading to the loss of 350 warehouse jobs.
In his submission, Mr Smith said that the company is currently due to pay back £276.5m in loans by 1 September, which would be pushed back by three years under the restructuring plan.In his submission, Mr Smith said that the company is currently due to pay back £276.5m in loans by 1 September, which would be pushed back by three years under the restructuring plan.
It would also see the company provided with a £30m overdraft facility and have some of its rents reduced. It will also see the company provided with a £30m overdraft facility and have some of its rents reduced.
Mr Smith continued that many of Poundland's stores were "unprofitable at their current rents", with the company paying "higher than market rates for a significant number" of its sites.Mr Smith continued that many of Poundland's stores were "unprofitable at their current rents", with the company paying "higher than market rates for a significant number" of its sites.
No-one has appeared in court to oppose the plan being approved. No-one appeared in court to oppose the plan being approved.