Poundland and its roughly 11,000 employees were given new breathing room on Tuesday after the discount retailer's American owner released £10 million in previously frozen cash, buying time for a last-minute rescue deal before a deadline that had been set to expire at midnight.
The chain had been edging toward administration after Gordon Brothers, the U.S. investment firm that bought Poundland for £1 last year, restricted its access to roughly £50 million in available funds — money the retailer says it needed to restock its 600 stores, pay staff and cover rent ahead of the crucial Christmas trading period. Poundland entered a 10-day moratorium shielding it from creditors that is due to expire Thursday, though people close to the matter told the BBC the deadline could be extended further if a solvent buyer emerges.
Gordon Brothers has rejected an earlier takeover bid, a decision that drew criticism from British lawmakers, including Prime Minister Andy Burnham, and the firm is now accused by critics of positioning itself to profit from selling off Poundland's stores and stock piecemeal rather than keeping the chain intact. The firm has denied those claims, and a parliamentary committee is set to question Gordon Brothers executives on Wednesday. If talks fail and the retailer is placed into formal administration — a process overseen in Britain by the government's Insolvency Service — rivals including Poundstretcher, Tesco and B&M are each said to have expressed interest in picking up individual Poundland stores rather than the chain as a whole.
Owner and management disagree on the numbers
The two sides disagree sharply on how the business is actually performing. Poundland's own management told staff last week that like-for-like sales — which strip out the effect of new store openings — were up 11.4% during a sales period that included Halloween, and that the company turned a £18.1 million profit in the year through September, a swing from a £68 million loss the year before. Gordon Brothers, by contrast, has described the retailer as "challenged and vulnerable to any potential downturn in future trading."
For now, the £10 million release — which people close to the talks characterized as "small in the scale of things" — is enough only to keep shelves partially stocked while a longer-term solution is worked out. Whether that solution preserves Poundland as a single chain or splits it among competitors is expected to become clearer once this week's deadline, extended or not, finally arrives.
