This article was written by Zoe Wood, for The Guardian on Monday 16th January 2012 20.06 UTC
Peacocks chief executive Richard Kirk is expected to lodge a rescue offer for the stricken fashion chain which has said it is going into administration after restructuring talks failed.
The board has filed an “intention to appoint administrators” for Peacocks and its sister chain Bonmarché which gives them 10 days to put together a plan while it prevents creditors pursuing debts through the courts. Sources suggested Kirk was close to making an offer for the chain which has 611 stores and more than 10,000 staff, but there was no certainty that it would succeed.
As the firm’s problems came to a head today the loss-making gifts chain Past Times also collapsed into administration with the closure of 46 stores and loss of 574 jobs. There is thought to be little prospect of finding a buyer for the remaining 51 stores, which employ another 500 people. KPMG has started a closing down sale.
Peacocks’ advisers have been trying to put together a rescue deal for months, but talks broke down at the weekend after Royal Bank of Scotland showed its ruthless side, joining a band of senior creditors to dash hopes of a debt-for-equity swap that would have handed control of Peacocks to its banks. RBS and Barclays were in the driving seat of the negotiations – which were said to involve 18 funds and lenders – as they were owed the most with both banks on the hook for more than £100m.
“The board of the Peacock Group and its advisers have been discussing for some time the restructuring of the business with the group’s lenders,” said the retailer. “Unfortunately these talks have now concluded and no agreement has been reached.”
The problem with Peacocks has always been thought to relate to its escalating £577m borrowings, rather than any issue with trading. As a result, many retail experts had hoped a deal could be struck between lenders and management to keep the company alive. Some elements of Peacocks borrowings came with rates of 17%, though the bill for this interest was deferred for several years.
Sources close to RBS insisted the bank had not changed its mind on Peacocks – or lost faith in the wider retail sector – though others at the negotiating table were adamant that the bank turned cold on a restructuring deal it had previously been enthusiastically promoting.
One source familiar with restructuring negotiations insisted Peacock’s woes were more concerned with recent trading than the last accounts suggested. He said there had been a marked decline in sales and margins over the traditional busy Christmas period. Meanwhile, RBS and some other lenders had also in part been put off by the perceived intransigence of landlords who were not prepared to lower rents or change lease terms.
While rescue talks with potential investors continue the directors opted to file an “intention to appoint an administrator” to “protect” the business while discussions continued. The company added that the existing management team would remain in place as an administrator had not been formally appointed yet. It is understood to be close to agreeing a sale of Bonmarché to the turnaround firm Sun European Capital.
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