Poundland set for crunch decision on survival after owner grilled by MPs

Poundland is approaching a crunch decision to stave off its collapse after its owner was accused by MPs of jeopardising “thousands of jobs on Britain’s high streets”.

The retailer’s directors, Barry Williams and Shaun Wills, are set to hold an emergency board meeting on Wednesday night over whether to trigger an extension to a moratorium which is holding off its creditors from calling in their debts, sources told City AM. 

Poundland filed a notice of intention to appoint administrators last month, but the 10-day freeze on creditors expires in a matter of hours. 

The crucial decision comes after Gordon Brothers, the Boston-based investment firm which owns Poundland, was grilled by MPs at a closed-doors hearing of Parliament’s business select committee on Wednesday afternoon.

Liam Byrne MP, chair of the committee, said on Wednesday night: “After extensive cross examination this afternoon, I’m deeply concerned that Gordon Brothers behaviour may have jeopardised  thousands of jobs on Britain’s high streets. 

“Gordon Brothers refused to say it will prioritise saving jobs over and above its own financial returns.”

The investment firm has faced political backlash in recent weeks after refusing a number of solvent offers to buy Poundland, insisting it is repaid for a £22.5m loan it inherited when it bought the retailer for just £1 last year.

‘Strangled of access to its own funds’

During the two-hour grilling, Newton-Jones told MPs he would support a move to hold off administrators, though this decision rests with Williams and Wills. Sources said the retailer’s directors were likely to agree to an extension.

Newton-Jones denied that Gordon Brothers had restricted Poundland’s access to funding during the sale process, a claim made by Steve Smith, the retailer’s founder. 

The Gordon Brothers executive also defended its commitment to protecting the retailer’s 12,000 jobs, though one MP questioned why he had not mentioned the company’s staff until late in the session.

Poundland managing director Barry Williams and finance chief Shaun Wills also appeared in front of the committee on Wednesday, telling MPs that the investment firm had made it harder for the retailer to access funds with which they could pay suppliers, which Gordon Brothers denies.

The investment firm appeared to offer a vastly different account of Poundland’s health to that offered by Poundland’s management, sources said, who suggested the business had turned a corner, pointing to its expected £18m profit.

Gordon Brothers released £10m of funding to Poundland earlier this week but  Byrne said “there’s concerning signs [Poundland has] been strangled of access to its own funds in what should be its busiest trading period in the run up to Christmas”. Gordon Brother claims it has made all funds available when requested.

The investment firm has faced significant scrutiny over recent weeks after refusing a number of solvent offers to buy Poundland. Newton-Jones appeared “exasperated at the media coverage” of the sale process and “tried to paint Gordon Brothers as the savior of the situation,” one person with knowledge of the session said.

They said they have “very little confidence” that the investment firm wants to keep Poundland intact.

Gordon Brothers is in talks with NCP-owner Martin Property Group, little-known investor Xyra Group and Irish investment firm Innovest Holdings over a solvent takeover of the discount retailer, sources told City AM. 

Retailers including Tesco, B&M, Lidl, Iceland, The Range and Poundstretcher are waiting in the wings to snap up Poundland’s stores and stock if it falls into administration. 

Political pressure

A collapse of Poundland would be the most significant to hit the retail sector in years and would strike a blow to Andy Burnham’s pledge to revive the high street.

The Prime Minister and Chancellor have made supporting Britain’s retail sector a key pillar of their government since taking power in July.

“The truth is that too many high streets have been left to hollow out, leaving town centres a shell of what they once were,” Burnham said in September. “That must change.”

He has previously called on Gordon Brothers to protect as many jobs as possible. He said last month: “If there was a potential owner to avoid [collapse] that hasn’t been accepted, then the business secretary and I want to know why that is the case.”