Topshop owner faces collapse within hours
Sir Philip Green's retail empire Arcadia, which includes Topshop, Burton and Dorothy Perkins, could face collapse within hours. The company is likely to enter administration on Monday (30.11.2020), putting 13,000 jobs at risk.
Senior sources at the company told the BBC on Sunday they do not expect a last-minute rescue deal.
The group had been seeking extra cash to help it plug the gap from lost sales during the pandemic.
Billionaire Mike Ashley's Frasers Group wrote to Arcadia on Sunday saying it would offer an emergency loan of up to £50m to help with the group's short-term cash-flow problems.
"Our offer would allow you to retain employment for many thousands of your staff, reopen hundreds of stores when the current lockdown ends, and protect the financial positions of thousands of members in your pension schemes," a letter addressed to Arcadia Group executives, and seen by the BBC, said.
The letter also said that the Frasers Group would consider giving out the emergency cash on an unsecured basis - meaning Arcadia would not need to put up collateral, such as property, to guarantee it would be paid back.
However, the offer would be immediately withdrawn if the group, or any of its smaller brands, enters an insolvency process.
"We would urge you to carefully consider this offer," the letter said.
Earlier on Sunday, a senior source at Arcadia Group told the BBC's business editor Simon Jack: "If this was about £50m we could find that in five minutes."
The source added: "This is obviously a sad day, we tried to save it a year ago when £200m was put into the business and the pension fund, but it's impossible to operate now.
"You don't know when you'll be open, you don't know what stock to buy."
Questions over the future of Sir Philip's retail empire were raised on Friday, after it emerged talks he had been holding with potential lenders for a £30m loan had failed.
It was seeking extra cash as coronavirus had had "a material impact on trading" across its businesses, it said.
Its brands once dominated High Street fashion, but its chains have been hit hard by store closures.
Arcadia would be the biggest retail collapse of the pandemic. But even before coronavirus, Arcadia's best-known names were struggling against newer, online-only fashion retailers like Asos, Boohoo and Pretty Little Thing.
Retail tycoon Sir Philip bought Arcadia Group, which also includes brands such as Evans and Outfit, in 2002. His wife, Lady Cristina Green, is the majority owner of its parent company Taveta Investments.
The couple are worth £930m, according to the Sunday Times Rich List.
Much of their wealth is derived from a £1.2bn dividend payment Sir Philip took from Arcadia and paid to his wife in 2005. Since Lady Green is a resident in Monaco, it was paid to her tax-free.
In a colourful career, Sir Philip has been both lauded as the "King of the High Street" and branded the "unacceptable face of capitalism". Adding to the uncertainty facing the thousands of Arcadia staff is an estimated £350m hole in the company's pension fund.
The chair of the Work and Pensions Committee Stephen Timms called on the Green family to plug the gap on Sunday.
"Whatever happens to the group, the Green family must make good the deficit in the Arcadia pension fund," the Labour MP said.
Mr Timms said he would raise the matter with the Pensions Regulator on Monday.
Pensions consultant John Ralfe told the BBC that if Sir Philip did use his personal wealth to plug the hole in the Arcadia pension pot, that would ensure workers enrolled in the scheme receive their full pension.
But Mr Ralfe said even if the retail magnate did not do that - or if he writes a cheque that is substantially less than £350m - Arcadia workers should still receive the majority of their pension entitlement through the Pension Protection Fund.
Sir Philip previously faced controversy for selling off BHS, the former department store chain, for £1 to high-profile businessman Dominic Chappell. The following year, BHS went bust with the loss of 11,000 jobs and a pension deficit of £571m.
He reached a deal with the Pensions Regulator to inject £363m into that scheme.
Mr Ralfe has said though that Sir Philip seemed to have "learnt his lesson" from the scandal.
In a deal with the Pensions Regulator in 2019, Lady Green agreed to add £100m into its two pension schemes over three years. The wider group also said it would inject £75m, although it paused payments in March for six months due to difficulties stemming from the pandemic.
The collapse of Arcadia could also have a knock-on effect on Debenhams. It could scupper a potential sale of the department store chain to JD Sports.
Arcadia is the biggest concession in Debenhams, accounting for about £75m of sales.
JD Sports had been closing in on a rescue deal to buy the chain, which is currently in administration for the second time in a year. It has already cut about 6,500 jobs since May.
Debenhams now has about 12,000 employees across 124 stores.
According to a source close to the JD Sports, the appointment of administrators to Arcadia would give the company "more to think about".
A final decision is expected within days.
Arcadia Group and Debenhams are far from the only recent casualties in the retail sector.
On Friday, menswear retailer Moss Bros launched a restructuring of its business after it said trading had been "severely impacted" by Covid-19. It hired auditors to prepare for the company voluntary arrangement earlier in 2020.
Fashion chains Peacocks and Jaeger were also placed into administration after owner Edinburgh Woollen Mill Group failed to find a buyer.