Wednesday, January 19

BHS paid more than £25m to owner in 13 months before administration: Denies speculation it is close to collapse



Almost 11,000 jobs are at risk after BHS called in administrators on Monday, the UK’s biggest high street failure since the collapse of Woolworths in 2008.

Sources with knowledge of BHS’s finances say that the payments to Retail Acquisitions included £2.8m in management fees, £2.1m in salaries and wages, £11m in legal and professional fees and £10m in interest payments.

BHS is battling to raise £100m to pay staff wages and continue trading, with 10,000 jobs at risk at the struggling department store chain. The retailer is still trying to obtain emergency funding almost four weeks after creditors approved a survival plan that involved landlords accepting deep cuts to the rent on stores.

The man behind Retail Acquisitions is Dominic Chappell, a former racing driver who has been declared bankrupt twice. Chappell owns 90% of Retail Acquisitions, which bought BHS for £1 from Sir Philip Green in March 2015.

The payments include a £8.4m loan to Retail Acquisitions, taken out in March 2015, which has already been reported by the Guardian. This is part of the professional fees.

Some £7m of the £10m of interest payments is understood to have been passed on to the investment firm Grovepoint for a loan taken out to support BHS.

The payments will raise questions about the management of BHS over the last year.

Duff & Phelps has been appointed as administrator to BHS and will keep stores open as it tries to find a buyer.

The pensions regulator has confirmed that it is investigating BHS, suggesting that it is considering whether to force former owner Green to contribute to the company’s £571m pension deficit.

In a statement, Duff & Phelps said: “The group has been undergoing restructuring and, as has been widely reported, the shareholders have been in negotiations to find a buyer for the business. These negotiations have been unsuccessful. In addition, property sales have not materialised as expected in both number and value.

“Consequently, as a result of a lower than expected cash balance, the group is very unlikely to meet all contractual payments. The directors therefore have no alternative but to put the group into administration to protect it for all creditors. The group will continue to trade as usual whilst the administrators seek to sell it as a going concern. Further announcements will be made as appropriate in due course.”

The retailer had failed to secure the emergency funding that it needed to pay wages and rent.

Duff & Phelps was understood to have had more than 30 expressions of interest in buying BHS by midday on Monday.

The retailer’s collapse presents a further problem for the government as it attempts to save thousands of jobs in the steel industry.

Javid said the government was in talks with BHS management about the retailer’s collapse.

Chappell did not return calls or messages seeking comment on the payments.

In a letter to employees on Sunday night, Chappell said: “It is with a deep heart that I have to report, despite a massive effort from the team, we have been unable to secure a funder or a trade sale.”

He indicated in the letter that staff wages for this month would be paid by the administrators.

Trade unions described the collapse of BHS as devastating. John Hannett, the Usdaw general secretary, said: “This is devastating news for the employees of BHS and we urge the company to change their attitude to trade unions and begin a dialogue with us at this difficult and worrying time.

“We also urge the administrators and the company to comply with the law, consult with staff and Usdaw as the union for BHS workers. We don’t want to see BHS staff locked out of discussions, sent to the back of the queue of creditors and treated like fixtures and fittings, as happened at Woolworth’s.

The government needs to intervene now to protect taxpayers from picking up the bill for redundancy payments and safeguard the Pension Protection Fund. We are in touch with our members working in BHS to reassure them that we will provide the support, advice and representation they require.

BHS denied speculation on Friday night that it was on the brink of falling into administration. A spokesman said it was “business as usual” at the company and it was “on track” with talks over funding.

Meanwhile, another 1,000 jobs are also understood to be risk at Austin Reed, the 116-year-old tailoring brand, which could call in administrators as early as next week. The retailer, founded in 1900 by Austin Leonard Reed and famous for its suits and shirts, is understood to have filed a notice of intention to appoint administrators on Wednesday and has lined up insolvency experts AlixPartners to advise.

The notice gives Austin Reed, which also owns the Viyella and CC (previously Country Casuals) fashion brands, 10 working days to resolve its financial problems before tipping into administration. It is understood to be looking for a potential buyer.

BHS was due to announce a £60m loan this week from Gordon Brothers, the private equity firm. However, talks over the loan are thought to be complex. Sir Philip Green, who used to own BHS, needs to release security he holds over BHS assets in order for the loan to go through, while the Pension Protection Fund is also in talks with the chain over its £571m pension deficit.

The 88-year-old retailer, which has 164 stores, had won a stay of execution after landlords, suppliers and other creditors backed a deal that involved landlords accepting cuts to their rent of up to 75% on 87 BHS shops. However, the company warned it still needed to raise £100m to pay staff wages and rent and to fund a vital turnaround plan.

Green sold BHS for £1 in March 2015 to a little-known collection of financiers, lawyers and accountants, led by Dominic Chappell, who has been declared bankrupt twice.

When the deal with landlords was approved, chief executive Darren Topp said he wanted the British public to give BHS a “second chance”.

He said: “We want to make it an iconic British brand again. We would like the British public to give us a second chance. Come and see our stores and you will be surprised.”

But Topp is understood to have called an emergency board meeting this month after some of the proceeds from the sale of BHS’s property went to the consortium of owners – known as Retail Acquisitions – instead of the struggling retailer itself.

BHS sold its Oxford Street store for £55m and its Sunderland brand for £2.2m, with the proceeds becoming part of its £100m financial package. However, £600,000 of the Oxford Street deal and £440,000 from the Sunderland deal went to Retail Acquisitions. The consortium said the payments were in accordance with the management services agreement between BHS and Retail Acquisitions.