LONDON — British Home Stores, the struggling British general merchandise retailer that Sir Philip Green sold last year for a nominal sum, has been put into administration, putting nearly 11,000 jobs at risk.
The decision to file for the British equivalent of Chapter 11 came a little more than a year after Green sold BHS to Retail Acquisitions Ltd., a group of entrepreneurs, lawyers and bankers who formed the vehicle specifically to buy it.
Duff & Phelps in London has been appointed as the administrator, and will seek to sell the company as a whole, or piecemeal. The retailer has 164 stores across the U.K., and more than 70 franchises in 18 countries such as the United Arab Emirates, Russia and Malaysia.
The failure of BHS is widely considered to be the U.K.’s biggest retail disaster since Woolworth’s collapsed in 2008 in the wake of the financial crisis.
Duff & Phelps said in a statement Monday that BHS: “Has been undergoing restructuring and the shareholders have been in negotiations to find a buyer for the business. These negotiations have been unsuccessful. In addition, property sales have not materialized as expected in both number and value.
“Consequently, as a result of a lower-than-expected cash balance, the group is very unlikely to meet all contractual payments. The directors therefore have no alternative but to put the group into administration to protect it for all creditors. The group will continue to trade as usual whilst the administrators seek to sell it as a going concern.”
Green was not available for comment, and a BHS spokesman could not immediately be reached for comment.
The new owners of BHS had struggled — and failed — to find 60 million pounds, or $86.4 million, in funding to keep the company operating on a day-to-day basis. BHS also has a 571 million pound, or $822 million, pension deficit, which will likely be covered by the state’s Pension Protection Fund and Green, according to British press reports.
As late as Friday, BHS had posted on its Web site that it was taking orders as usual and that “despite press speculation it is not in, nor has applied to go into administration.”
Over the weekend, BHS owner Dominic Chappell had held talks with potential white knights, including Sports Direct. Green, who is one of BHS’ biggest creditors, had also tried to find a solution.
Over the past months, the chain sold prime real estate, renegotiated terms with landlords and sought loans, but it was not enough to keep BHS in operation.
British Home Stores was established in 1928, and the outlets are fixtures on high streets up and down the U.K., selling everything from clothing, fashion, accessories and gift items to home lighting, bedding and furniture.
Green had bought BHS in 2000 from the-then Storehouse for 200 million pounds, or $299.6 million. He ran it alongside his Arcadia Group, which owns Topshop and Topman, Miss Selfridge, Wallis, Evans and Dorothy Perkins.
Last year, Green sought a buyer for BHS with a desire to take the company forward. It was a tall order, as BHS not only has suffered the chill wind that continues to blow down the British high street, but its clothing proposition also faced fierce competition from the likes of discounters such as Primark, and fast-fashion behemoths such as Zara and H&M.
Although the terms of the deal were never disclosed, it was widely reported that Green sold BHS for 1 pound, or $1.50, and then became one of the company’s biggest creditors. At the time, he said BHS was handed over “in a sound financial position with significant cash balances and banking facilities in place.”
Kevin Smith, the former chairman of Retail Acquisitions, called the BHS purchase “a fantastic opportunity to breathe new life into this iconic British high street brand.” He noted the firm would back the existing management and invest in their plan: “We are convinced that with strategic and focused support, we will return BHS to profitability and safeguard the workforce.”