Poundland bosses are hoping ministers can lean on its owner to unlock access to crucial operational funding.
The retailer was forced to file a notice of intention to appoint administrators last week after owner Gordon Brothers restricted its access to an existing loan facility.
Poundland MD Barry Williams and finance chief Shaun Wills are due to meet Kate Deardon, minister of state for the future of work, on Wednesday in the hope full administration can be avoided. Gordon Brothers is also due to meet Deardon.
The US private equity firm restricted Poundland’s access to funding after rejecting a bid for the retailer which would not have included repayment of a £30m shareholder loan in full on completion of the transaction. The offer from Martin Property Group, backed by Poundland management, is thought to be the only solvent bid for the discount chain.
Other offers are for parts of the business, with Tesco reportedly in discussions over 150 of Poundland’s 600 stores.
Poundland’s plight was raised by MPs in urgent questions in the House of Commons on Tuesday, with Gareth Snell, Labour MP for Stoke-on-Trent Central, asking the government to “send a message to Gordon Brothers that the predatory capitalism that they are putting into this company will not be tolerated”.
However, Gordon Brothers has defended its handling of Poundland in a letter to government, seen by Sky News.
The letter from Mark Newton-Jones, who runs Gordon Brothers’ European operations, to David Bickerton, chief business advisor to the DBIST, said the PE firm had put “significant working capital at risk to narrow a £70m loss and return to a baseline EBITDA [earnings] positive position earlier this year”.
“However, like other high street retailers, the company faces multiple economic challenges, including rising inflation, increasing staffing costs and shrinkage from severe levels of shoplifting, which means it is still not cash-generative at a sustainable level despite the turnaround efforts.”
The letter argued a break-up of Poundland appeared to provide the best prospect of saving jobs, with B&M also interested in stores.
“It was apparent that, taken together, the approaches from some of Britain’s most well-regarded employers could see the transition of multiple hundreds of stores and continued employment for many thousands of staff,” it said.
“In light of this, Gordon Brothers took the view that attention must be paid to properly and thoroughly evaluat[ing] all options.
“Additional offers continue to be received and active discussions continue on proposals that would, together, already cover a significant number of Poundland’s 10,500+ employees across its UK and Ireland stores.”
Filing the notice of intention to appoint administrators on 29 October triggered a 10 working day moratorium in which Poundland can continue to seek a solvent outcome while creditors are blocked from taking legal action over debt.
Alvarez & Marsal is advising Gordon Brothers on the sale process, with AlixPartners lined up to act as administrator.
Retail trade union Usdaw said it had thanked MP Snell for raising the matter in the House of Commons.
“Despite our repeated attempts to speak to Gordon Brothers, the owners of Poundland and the decision makers over the future of the business, they continue to ignore us,” said USDAW national officer Bally Auluk.
“It is at least something that the owners are talking to the Government, but we still urge them to engage directly with Usdaw.”
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