An insolvency expert has warned that Poundland’s crisis could trigger a domino effect across Britain’s high streets.

With around 600 Poundland stores across the UK entering the crucial Christmas trading period, any move into insolvency could put supplier businesses at risk, according to Molly Monks, F.I.P.A., insolvency practitioner and founder of Parker Walsh.

“For many suppliers, a major retailer is not simply another customer,” she said. “It can represent a significant proportion of their turnover, and they may already have invested heavily in producing, transporting and delivering goods. If payments are delayed or invoices remain unpaid, those businesses can quickly find themselves under pressure to meet their own commitments, including wages, rent and payments to other suppliers.”

The timing of the decision by Poundland’s owner, US investment firm Gordon Brothers, to place the retailer into administration shortly before Christmas, when stores and warehouses are typically full of seasonal inventory, much supplied on credit, has attracted scrutiny from some analysts and critics.

At the centre of the debate is a £30 million shareholder loan that Gordon Brothers acquired as part of its £1 takeover of the business. As the holder of that loan, Gordon Brothers could rank ahead of unsecured creditors in any administration process.

If Poundland enters administration, proceeds from the sale of that Christmas stock could be used to repay secured creditors and potentially the shareholder loan before unsecured creditors, including many suppliers, receive payment. The eventual distribution of funds would depend on the company’s capital structure and the administration process.

Source link