Poundland’s 10-day protection from creditors ends Thursday; BBC reports extension increasingly likely
Poundland is unable to buy new stock for its 600 shops after Gordon Brothers restricted the discount chain’s access to cash, BBC News reported. The retailer has until Thursday to secure a rescue deal; if neither a deal nor a deadline extension is secured, it is set to enter administration and could be broken up.
One insider described the situation as “running on fumes.” BBC News understood that about £50m had been frozen by Gordon Brothers, leaving Poundland’s 600 shops running out of stock. Poundland has filed a notice of intention to appoint administrators, which protects the company from creditors until Thursday under a 10-day moratorium.
The pressure comes after Gordon Brothers, the American owner, bought Poundland for £1 last June and rejected a takeover bid that the BBC said could have saved thousands of jobs now at risk. Gordon Brothers has been approached for comment.
A source said access to funds was restricted because of tension between Gordon Brothers’ dual role as creditor and shareholder. The source expected a relaxation of funds in the next two days.
Barry Williams told staff that like-for-like sales, which exclude new store openings, rose 11.4% last week, a period that included Halloween, and were £1.5m ahead of budget. He said the business made an £18.1m profit in the year to September, which he called a “strong recovery” from a £68m loss the previous year. The latest annual accounts have not been audited.
A BBC News report published on 29 October said Burnham was “ready to support” Poundland staff. Another report published that day said Poundland staff protested after the chain approached administrators.
Gordon Brothers described the chain differently, saying it remained “challenged and vulnerable to any potential downturn in future trading.” The owner said it had provided significant funding to support trading since acquiring the business and had made £18m from a combination of debt interest payments and other fees and charges.
A source familiar with the sales process said London-based Xyra Group was making “significant progress” in its last-minute bid and could now be the front runner.
On Wednesday, Gordon Brothers executives are due to appear before the Business Select Committee. MPs will probe whether they are genuinely pursuing a solvent rescue and whether every realistic step is being taken to protect jobs and stores; Poundland has 11,000 employees. The session is private because commercially sensitive discussions with bidders continue.
One observer remarked: “if Gordon Brothers is going in front of that committee, you don’t want to be giving the message we’re pulling up the drawbridge.”
BBC News reported that extending Thursday’s deadline now seemed increasingly likely if a solvent deal remained possible, but said such an extension would be difficult to seek if Gordon Brothers continued to block funding.
Even a sale of the business as a whole would not guarantee that a new owner would retain every store. The BBC reported that suppliers preferred that outcome to hundreds of sites being sold to other retailers. There has been interest from the likes of Poundstretcher, Tesco and B&M in picking up stores, which could mean continuing employment for many workers.
The central unresolved question is whether a piecemeal sale would protect more jobs than a buyer willing to keep Poundland trading as a national chain. If neither a rescue deal nor an extension arrives, administration and a breakup remain possible, with 11,000 jobs and hundreds of stores at risk.