Planet Organic 3

More than 400 unsecured creditors will lose out on the majority of the £8.4m owed as a result of the administration

Planet Organic owed its creditors more than £12.5m when it entered administration last month, according to a new report that lifts the lid on the collapse and details how much the chain’s founder Renée Elliott paid to rescue the business.

Elliott, who launched the organic grocer in 1995 before selling her stake to private equity firm Inverleith in 2018, struck a last-minute pre-pack deal in April to save 10 Planet Organic stores and secure the future of the brand.

A report by administrator Interpath Advisory revealed Bioren Ltd, an investment vehicle backed by Elliott and husband Brian, paid £810k to close the deal, including £330k for goodwill and IP, £330k for stock and £150k for equipment and fixtures and fittings at the store base.

The report also confirmed the new management team at Planet will be formed of the Elliotts, former CEO Peter Marsh and former buying director Al Overton, who left following George Dymond’s appointment as the new boss of the supermarket chain in 2021.

More than 400 unsecured creditors, which includes hundreds of grocery suppliers, will lose out on the majority of the £8.4m owed as a result of the administration, but a small dividend is expected to be paid back, the document showed.

The majority of the brands are owed less than £20k, with London-based speciality wholesaler Wholegood, which is itself seeking new financing, one of the biggest losers with £428k owed.

As Nature Intended, which Planet acquired in 2020, is also listed as being owed £1.5m, while Inverleith is owed £118k and Howard Tenens Logistics, which invested in Planet as part of a distribution partnership when the retailer opened its own warehouse in Sunbury-on-Thames in May 2022, is owed £117k.

Secured creditors Triodos and Lloyds were owed £4.1m, made up of a Coronavirus Business Interruption Loan facility from the former and credit card and soft loan facilities of about £50k from the latter.

Lloyds will be repaid in full, but Triodos is expected to suffer an unspecified shortfall.

The report also stated that shareholders made significant equity injections to support working capital.

More than 40 shareholders are listed in the report looking at loss of shares worth a combined £5.8m, with majority owner Inverleith making up £3m of the total.

Money owed to staff for wages, holiday pay and pension benefits, amounting to about £27k, is estimated to be paid in full, while HMRC is also expected to receive all the outstanding £710k.

Covid trading difficulties

The report also outlined Planet’s struggles in the immediate aftermath of the As Nature Intended acquisition in 2020 when Covid hit footfall in its London stores soon after the deal completed. The report outlined a 60% slump in footfall at the two best-performing central London stores, which pushed the company to a loss from 2020 onwards.

While efforts were made to improve profitability by simplifying the business and introducing several operational changes, it continued to suffer with high cost inflation, worsening pressures in the wider market and high overhead costs, the Inverleith reported added.

Following failed attempts to raise new funds in 2022, including a £7m crowdfunding campaign that the business had to scrap when it dramatically scaled down expansion plans from 50 stores to less than 20, and in 2023, Planet drafted in advisors at consultancy firm Interpath to find a solution in February 2023.

The company approached more than 220 parties to explore interest in a sale or new financing, with initial interest indicating a possibility of a deal from an unnamed party, understood to be Waitrose.

Waitrose explored buying Planet’s shares along with an associated working capital injection, which was subject to a “demonstratable reduction in overheads”.

However, the report added that by the end of March any hope for a solvent transaction disappeared, with media reports at the time reporting Waitrose walked away as its own financial difficulties and trading performance created headlines.

Once talks with Waitrose fell apart, Planet put Interpath on standby for an administration, filing a notice of intention to appoint administrators with the courts on 30 March to give it breathing room while it desperately sought a rescue deal.

Interested parties

Interpath subsequently spoke to 19 interested parties, who signed NDAs, with a final deadline for offers of 11 April.

Four unnamed parties submitted offers on an insolvent basis for the business and assets, with bids ranging from keeping between seven and 11 stores open. A further two offers were made on a brand-only basis but would not have generated a better return for creditors than the going concern bids.

Sky News reported last month that Sainsbury’s and Holland & Barrett were weighing up bids for the business, while Redbus Ventures, an investment vehicle set up by one of the founders of Lovefilm, was also reportedly interested.

The Interpath report said three of the four going concern bids went to the final stages, but two “were unable to be delivered at the offer value”, while the remaining party later withdrew their offer.

Interpath then went back to other parties that had submitted offers previously. Elliot and her Bioren investment newco then completed a pre-pack rescue deal on 25 April as Interpath was officially appointed as administrator.

The deal saved 10 of Planet’s 14 stores, and with it the jobs of 263 staff, while four stores in Henley, Tottenham Court Road, Bermondsey and Teddington were shut immediately.