16th Jan 12
RBS pushes Peacocks towards administration
by Paul Russell
Pecking order: Peacocks threatened as RBS holds lending
Pecking order: Peacocks threatened as RBS holds lending
The Royal Bank of Scotland has been revealed as the main lender unwilling to save the embattled retailer Peacocks, putting some 10,000 jobs at risk.
RBS is believed to be holding back from injecting any more funds into the company, which currently has £240m of debt. The bank’s unwillingness to save Peacocks is not only worrying for the high street retailers, which has 700 stores, it is also a concern for many other retailers backed by the RBS.
RBS also supports Clinton Cards and HMV, both of which have been hit hard over recent months.
Talks have been ongoing in Cardiff, where the retailer has its headquarters and where the chief executive Richard Kirk is based. However, KPMG is likely to be installed as administrator if no solution is found within the coming few days. If Peacocks was to collapse, it would be the biggest high street casualty from the festive period.
The company, a low-cost fashion chain that competes against the likes of New Look and Primark but also sells childrenswear, has felt the effects of the economic downturn. It claims to be trading profitably, before taking interest payments into account, and enjoyed a strong Christmas.
However, since it became private in 2006, Peacocks has been burdened with a lot of debt. Sources indicated that debts now amount to £240m, although some expects are of the opinion that the number could be considerably higher. The retailer’s debt is held by 15 different lenders including RBS, which manages 17 per cent of the debt, as well as Barclays.
A spokesman for the RBS said that each company restructure is considered on its own merits, although clearly the tough conditions which currently face retailers is an important factor. He insisted that they have been and will continue to be supportive of Peacocks, but said that new investors who were willing to inject sufficient funds could not be found. The spokesman explained that if further capital is required, this is a shareholder issue and needs to be approved by the majority of lenders.
A Barclays spokesman said that the lender has been willing to back the restructuring management at every stage.
The company is looking to sell off the Bon Marche chain, and Sun European Partners has emerged as the most likely buyer. But any sum which Peacocks receives for Bon Marche is expected to repay just a modest amount of the overall debts.
The retailer was taken private in a £420m deal in 2006 which was backed by Perry Capital, Goldman Sachs and Och-Zif, which are still the major shareholders.
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