Poundland’s owner has reportedly released millions of pounds from the company’s balance sheet to pay suppliers as administration looms for the discount retailer.
Poundland could enter administration this week after Gordon Brothers rejected a rescue bid from its management team, backed by Ireland-based Martin Property Group, which would have saved its nearly 12,000 staff and potentially also a wider supplier base of 18,000 people.
Poundland has filed a notice to appoint administrators, but the moratorium on creditors calling in debts is set to expire on Thursday. US-based investment group Gordon Brothers has frozen Poundland’s bosses’ access to company funds after accusing them of breaching the terms of its asset-based lending facility.
Sky News has now reported that Gordon Brothers has released £10m, which its sources said was “a vital step” – but suppliers dependent on the chain may still be in dire trouble as Poundland has not placed any orders for at least two weeks.
The crisis could trigger a domino effect across the high street, according to an expert we spoke with last week.
The sticking point for the Martin Property Group takeover was a demand from Gordon Brothers for full repayment of a £30m shareholder loan.
Little-known London investment firm Xyra Group then reportedly offered to pay off £12.5m of this debt, with the rest deferred. It is said to have asked the retailer’s founder Steve Smith to back its bid.
While the validity of the buyer is yet to be established – such as whether it has the funds – it has appointed a credible figure to its board.
Andrew Brode is a non-executive director at RWS, an enterprise software company founded in 1958 which has repositioned itself recently as a provider of AI solutions.
Gordon Brothers said Poundland, which it bought for just £1 last summer from Pepco Group, has faced years of instability and “remains challenged and vulnerable”.
On Wednesday Gordon Brothers’ UK lead will appear in front of Parliament’s Business Select Committee to answer questions on its efforts to find a solvent buyer.