The future of Poundland hangs in the balance as the discount chain edges towards collapse, the understands.
The retailer’s directors are filing a notice of intention to appoint administrators, which if approved by the High Court, will give the business 10 days breathing space to find a rescue deal.
Poundland’s managing director Barry Williams wrote a memo to his 12,000 staff across its 600 stores in the UK and Ireland saying the US owner of the chain had limited Poundland’s access to funding.
Gordon Brothers bought Poundland, which had been struggling, from the Polish retail group Pepco in June last year for a nominal £1.
But a little over a year later it put the business up for sale.
Irish firm Martin Property Group (MPG) put forward a bid to take the business on as a going concern, which was the preferred option for management, but it is understood this did not meet Gordon Brothers’ expectations.
Gordon Brothers wants to recoup a £30m shareholder loan it inherited from the previous owners as part of a its deal, but it is understood the Martin Property Group offer was for £5m, with the rest of the payment deferred.
It means Poundland is now heading towards an insolvency process.
Gordon Brothers could secure a new owner through what is known as a pre-pack administration.
But the most likely option for the business to be broken up and for parcels of stores to be sold.
A Gordon Brothers insider said this would allow creditors to recover funds. Gordon Brothers is the main creditor, and has made £70m of loans to the business.
The US investment firm’s position is that current employees may be able to get employment with new store owners.
This type of process would let interested parties firm up offers.
Interested parties include Poundstretcher owner, Fortress, which according to one insider is interested to take on between 200 and 250 stores.
Another large retailer is understood to be interested in buying up more than 100 other sites.
More than half a dozen retailers, include Iceland, Lidl, and B&M, have expressed interest in Poundland’s store estate.