Deloitte poised to administrate ailing Poundworld
Big Four professional services firm Deloitte is understood to be on the verge of an appointment as Poundworld administrator. While BDO is also reportedly in the frame for the role, Deloitte’s pre-existing relationship with the floundering retailer places it as a prime candidate, should rescue talks for the discounter collapse.
According to reports surfacing in the British press, Poundworld is on the brink of announcing its intention to appoint administrators, putting around 5,300 jobs at risk. The discount retailer is low on cash following a sustained period of poor performance, and is filing the notice because it will give the business protection from its creditors for two weeks.
The retailer, not to be confused with Poundland – which hired AlixPartners last year to deal with financial challenges – was hit with a £5.7 million charge for onerous leases, a provision retailers prepare for when the cost of a lease is no longer covered by the income of a store. The news followed a widening of Poundworld's between 2016-17, from £5.4 million to £17.1 million.
The private equity firm which owns Poundworld, TPG Capital, already had one Company Voluntary Arrangement (CVA) on its hands this year – as the group also owns restaurant chain Prezzo – and in April 2018 the company was mulling over a second insolvency procedure which would allow it to renegotiate with landlords to slash rents and close as many as 100 of Poundworld’s 355 stores. The plans never came to fruition, however, and now the retailer's adviser of choice, Deloitte, is understood to be waiting in the wings with contingency plans for an administration, should further talks collapse.
If a solvent sale of Poundworld cannot be agreed, the business could be sold through a pre-pack administration or be liquidated outright, underlining the urgency of rescue talks which Deloitte is presently leading. Inside sources at the firm have also alluded to BDO being lined up as a potential administrator, should Deloitte’s pre-existing relationship with the case cause problems in the winding down process.
Poundworld is the latest in a succession of high street presences to face bankruptcy in 2018. At the end of February, Toys R Us and Maplin collapsed within a matter of hours of one another, and were followed by a multitude of other brands either entering CVAs or entering administration. A number of different factors are said to have played into the retail crunch experienced across Britain and the world this year, but the most commonly cited are the rise of ecommerce, and the mismanagement of properties by private equity firms, which often saddle newly purchased brands with large amounts of debt, as was the case with Toys R Us and American teen fashion store Claire’s.
