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Mike Ashley offers a £ 50 million lifeline to keep Arcadia Group afloat amid an impending fight between the biggest beasts on the street for control of Sir Philip Green’s TopShop empire.
Sky News has learned that Ashley’s Frasers Group made plans for an emergency loan to Arcadia just hours before its board appoints administrators, putting 13,000 jobs at risk.
The proposal will intensify the bitter rivalry between the two men and reflects similar tactics used by Ashley before the collapse of other large retailers, including Debenhams, in recent years.
Arcadia’s collapse would crown one of the most spectacular implosions in recent business history
Chris Wootton, Frasers CFO, confirmed the offer on Saturday and said: “We look forward to Sir Philip Green and the Arcadia Group reaching out to us today to discuss how we can support them and help save as many jobs as possible.”
A source close to Frasers said the proposed refinancing would likely be in the form of a guaranteed loan and was aimed at preventing Arcadia, which also owns Burton and Dorothy Perkins, from falling into administration.
However, the offer generated skepticism among analysts, who noted that any loan from Frasers Group or Ashley would require approval of their pension plan, which in turn would require additional security on their exposure to the company.
“Sounds like a trick,” said one.
Ashley told ITV News on Friday that she was interested in buying all of Arcadia’s brands.
Sky News revealed earlier this month that Arcadia had been in talks with various parties about a £ 30 million emergency loan, but it is understood that the issue of security played a large role in the inability to finalize a deal.
Sports Direct founder Mike Ashley has offered to keep Arcadia afloat
The collapse of Sir Philip’s retail group, owned by the billionaire mogul since 2002, would make him the most prominent victim since the start of the coronavirus pandemic, joining Debenhams, Edinburgh Woolen Mill and Cath Kidston on the insolvency list.
This weekend, it also emerged that the tax collector was also likely to lose tens of millions of pounds from the Arcadia management due to the likely time of insolvency.
Starting Tuesday, the introduction of Crown Preference into bad debts will mean that Her Majesty’s revenue and customs will get ahead of the unsecured creditors and lenders who fund companies from their inventories and stocks.
However, if Arcadia appoints trustees on Monday, HMRC will be classified as an unsecured creditor, meaning it will likely see only a modest repayment of the tens of millions of pounds that Sir Philip’s empire is believed to owe.
That timing is said to be coincidental rather than deliberate, with people close to the situation pointing out that HMRC’s diminished recoveries would result in more money being returned to Arcadia’s pension plan and to the company’s many small business providers. .
Arcadia declined to comment beyond a statement it had issued on Friday, in which it said: “The forced closure of our stores for extended periods as a result of the COVID-19 pandemic has had a material impact on commerce in all of our business.
“As a result, Arcadia’s boards have been working on a number of contingency options to secure the future of the group’s brands.
“Brands continue to be marketed and our stores will reopen in England and return on investment as soon as government COVID-19 restrictions are lifted next week.”
A new statement is expected on Monday.
Sir Philip Green in a Topshop store
Ashley’s stated interest in making a last-minute loan to Arcadia comes as he and other street moguls position themselves to try to take over TopShop and some of Arcadia’s other brands.
JD Sports Fashion, Boohoo Group and Next are expected to compete for TopShop, which less than a decade ago was valued at £ 2bn but could now be priced at around £ 250m.
Sir Philip is said to be unlikely to try to buy back any of Arcadia’s business operations from the trustees.
The administration’s confirmation would come after a turbulent few years in which Sir Philip’s reputation was destroyed and his fortune diminished by the upheaval on Main Street and, more recently, the coronavirus pandemic.
Arcadia employs about 13,000 people, having announced about 500 job cuts at head office earlier this year.
It has more than 500 independent sites, most of which are closed due to the second lockdown across England, which ends next week.
Most of the group’s employees have had their salaries subsidized by the taxpayer this year under the government’s leave scheme.
Topshop on Oxford Street in London, which has been closed for much of the year due to closures
The collapse of the company would crown one of the most spectacular implosions in recent corporate history.
Sir Philip bought the High Street group in 2002 for £ 850 million, and just three years later paid what remains one of the largest dividends in history, £ 1.2 billion, to Arcadia’s registered owner, Lady Christina. .
For years, he was hailed as a street colossus, advising David Cameron on public sector waste during his tenure as prime minister.
In 2012, he sold a 25% stake in TopShop’s immediate holding to Leonard Green & Partners, a private equity firm, valuing the fashion chain at £ 2bn.
Later, Sir Philip would buy it back for just $ 1.
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His decision to sell the BHS department store chain in 2015 for £ 1 to Dominic Chappell, a former bankrupt who was recently jailed for tax evasion, set off a chain of events that cost Sir Philip his reputation and much of his fortune.
BHS collapsed just a year after that deal, sparking a bitter dispute over Sir Philip’s responsibilities to his retirees.
In early 2017, Sir Philip struck a deal with pension watchdogs to pay more than £ 360 million to the BHS scheme and that set the tone for negotiations on Arcadia’s two retirement fund. years later.
Last year, the mogul narrowly secured approval of a voluntary company deal in Arcadia, but was forced to commit a package of assets worth more than £ 400m to the company’s pension plan. .
Sir Philip’s miserable period has not been limited to the pursuit of his business interests.
He was also caught up in a storm over his behavior toward Arcadia employees and his use of nondisclosure agreements to prevent former workers from discussing their severance packages.
