The key facts

  • Poundland has filed a notice of intent to appoint administrators; if approved by the High Court, the chain will get a 10-day moratorium on creditor claims
  • Managing director Barry Williams told 12,000 employees that Gordon Brothers had restricted access to funds needed for day-to-day operations
  • Martin Property Group's offer did not cover Gordon Brothers' demand to repay a £30 million loan; a piecemeal sale of stores is also being considered

A chain of 600 stores on the brink of administration

The fate of the British discount chain Poundland is in doubt: the company has filed a notice of intent to appoint administrators, the BBC reports. If the High Court approves the procedure, the business will get a 10-day reprieve — a moratorium on creditor claims — to find a rescue deal. According to the BBC, Gordon Brothers has already identified the firm AlixPartners as the future administrators; AlixPartners itself declined to comment.

Conflict between the owner and management

Poundland managing director Barry Williams told 12,000 employees across 600 stores in the UK and Ireland in a memo that the American owner had restricted the chain's access to the funds needed for day-to-day operations. “Our sales are strong, our recovery is gaining momentum. This business simply does not deserve any form of administration,” the BBC quoted him as saying. Management described the situation as “unexpected, unwanted and entirely preventable”.

A collapsed deal and possible scenarios

Gordon Brothers bought the struggling Poundland from Poland's Pepco Group last year for a symbolic £1, and put it up for sale in September. Ireland's Martin Property Group offered to buy the business as a going concern, but, according to information obtained by the BBC, the offer fell short of the owner's expectations: Gordon Brothers wants to recover an inherited shareholder loan of £30 million, and MPG was not prepared to pay the full amount upfront. Williams described the offer as “fully funded and ready to execute”, capable of keeping the business intact.

Resignation of directors and the owner's position

Three independent directors, appointed earlier this month to oversee the sale, resigned with immediate effect over their disagreement with Gordon Brothers' decision to reject MPG's “solvent” offer. The owner itself had previously stated that although MPG had been identified by management as the “preferred buyer”, “attention should now switch to other active bids”, including formal and indicative offers for significant viable parts of the business from well-known retailers. If the procedure is triggered, Gordon Brothers will either carry out a pre-pack administration with a sale to a new owner, or break up the chain by selling stores to interested parties — Iceland, Lidl and B&M have been named. Poundland's main creditor is Gordon Brothers itself.

A woman in a Poundland storeImage source, Getty Images