Poundland owner extracted millions when chain was on ‘knife-edge’, MPs say

Poundland owner extracted millions when chain was on ‘knife-edge’, MPs say Retailer’s management to seek two-week extension of legal protection from creditors in high court

MPs have accused the owner of Poundland of extracting millions of pounds from the retailer when it was on a “knife-edge” as the budget retailer seeks extra time to secure a rescue deal.

The management of Poundland, which employs 12,000 people and operates 600 stores in the UK and Ireland, will seek a two-week extension of legal protection from creditors from the high court on Thursday morning.

The budget chain’s owner, Gordon Brothers, is under pressure to accept a bid for the company that would save retail jobs and protect thousands of suppliers since Poundland filed a notice of intention to appoint administrators two weeks ago.

The legal measure protects Poundland from the demands of creditors until Thursday morning while a solution to its problems is sought.

Directors of Poundland are now seeking a further 10 working days’ grace, which must be approved by the high court. That comes after Gordon Brothers, which is understood to be supportive of the extension, released £10m more in funds to help Poundland secure new stock and keep trading.

Without the legal protection in place, Poundland is likely to have to call in administrators; the advisory firm Alix Partners is already lined up.

The European head of Gordon Brothers, Mark Newton-Jones, gave evidence in private for almost two hours to the Commons business select committee on Wednesday afternoon after MPs called on the government to protect Poundland and other high street stores from “predatory capitalism” and asset-stripping last week.

Liam Byrne, the chair of the business select committee, said that after questioning Newton-Jones he was “deeply concerned that Gordon Brothers behaviour may have jeopardised thousands of jobs on Britain’s high streets”. He said: “Over the last 17 months, they have taken millions out of Poundland when the business was on a ‘knife-edge’. “Now Poundland appears to be on the rebound, there’s concerning signs it’s been strangled of access to its own funds in what should be its busiest trading period in the run-up to Christmas. “Worse, Gordon Brothers refused to say it will prioritise saving jobs over and above its own financial returns.”

The committee separately heard from Poundland’s management team, led by Barry Williams, who had been fighting to save the business.

Sources said Poundland continued to trade well, with up year on year, despite its problems, but it only has enough cash to support the business for a short period. Gordon Brothers has said Poundland remains “challenged and vulnerable to any potential downturn in future trading”.