Taken from the FT:
A brutal winter for Britain’s consumer economy claimed two high-profile casualties on Wednesday, as the British arm of Toys R Us collapsed into insolvency and a national electronics chain said it, too, had abandoned efforts to reach a rescue deal.
Maplin Electronics had been forced to look for a buyer after credit insurers refused to cover its suppliers’ exposure, but called in PwC as administrators after talks drew a blank.
Insolvency specialists at Moorfields Advisory on Wednesday began the process of closing the US retailer’s British operation, which employs nearly 3,000 people and has an estimated funding shortfall of at least £25m in its pension scheme. Its failure comes just two months after the chain won creditor backing for a sweeping restructuring plan to tame its unmanageable rent bill.
Maplin Electronics had held urgent talks with potential buyers on Tuesday in a last-minute attempt to stay out of administration, people briefed on the discussions said.*But on Wednesday Graham Harris, chief executive, said: “It has not been possible to secure a solvent sale of the business and as a result we now have no alternative but to enter into an administration process.”
The chains have become the first high-profile casualties in a bleak winter that saw UK consumer spending decline in January for the first time in five years, according to figures from Visa.
“Rising costs from the national living wage, apprenticeship levy and inflation are hitting retailers with a big high-street presence hard,” said*Julie Palmer, a managing partner at Begbies Traynor, the business consultancy.
The British outpost of Toys R US had been battling to raise cash to pay a tax liability that fell due this week, but the efforts stalled after a number of private equity funds and restructuring specialists walked away, according to people briefed on the talks.
Since launching in the US during the post-second world war baby boom of the 1950s, Toys R Us evolved to become a “category-killing” big-box store chain, and was taken private in 2005 by a consortium of buyout funds that included Bain Capital, KKR and Vornado Realty Trust.
The private equity owners loaded the company with $5bn of long-term loans, which forced the chain to spend more than $250m on debt service alone — a burden that analysts say may have made it harder to invest in revamping stores.
Eventually the company buckled under the strain, further weakened by an online shopping revolution that offers consumers fast delivery and enormous choice, eroding speciality retailers’ competitive edge.
It filed for bankruptcy in the US in September, triggering a tussle between pension regulators, landlords and executives over the future of the UK chain.
The UK’s Pension Protection Fund, an industry-backed lifeboat that is now expected to bail out the retailer’s stricken pensioners, threatened in December to block a restructuring plan that involved closing at least a quarter of its 105 UK stores.
A brutal winter for Britain’s consumer economy claimed two high-profile casualties on Wednesday, as the British arm of Toys R Us collapsed into insolvency and a national electronics chain said it, too, had abandoned efforts to reach a rescue deal.
Maplin Electronics had been forced to look for a buyer after credit insurers refused to cover its suppliers’ exposure, but called in PwC as administrators after talks drew a blank.
Insolvency specialists at Moorfields Advisory on Wednesday began the process of closing the US retailer’s British operation, which employs nearly 3,000 people and has an estimated funding shortfall of at least £25m in its pension scheme. Its failure comes just two months after the chain won creditor backing for a sweeping restructuring plan to tame its unmanageable rent bill.
Maplin Electronics had held urgent talks with potential buyers on Tuesday in a last-minute attempt to stay out of administration, people briefed on the discussions said.*But on Wednesday Graham Harris, chief executive, said: “It has not been possible to secure a solvent sale of the business and as a result we now have no alternative but to enter into an administration process.”
The chains have become the first high-profile casualties in a bleak winter that saw UK consumer spending decline in January for the first time in five years, according to figures from Visa.
“Rising costs from the national living wage, apprenticeship levy and inflation are hitting retailers with a big high-street presence hard,” said*Julie Palmer, a managing partner at Begbies Traynor, the business consultancy.
The British outpost of Toys R US had been battling to raise cash to pay a tax liability that fell due this week, but the efforts stalled after a number of private equity funds and restructuring specialists walked away, according to people briefed on the talks.
Since launching in the US during the post-second world war baby boom of the 1950s, Toys R Us evolved to become a “category-killing” big-box store chain, and was taken private in 2005 by a consortium of buyout funds that included Bain Capital, KKR and Vornado Realty Trust.
The private equity owners loaded the company with $5bn of long-term loans, which forced the chain to spend more than $250m on debt service alone — a burden that analysts say may have made it harder to invest in revamping stores.
Eventually the company buckled under the strain, further weakened by an online shopping revolution that offers consumers fast delivery and enormous choice, eroding speciality retailers’ competitive edge.
It filed for bankruptcy in the US in September, triggering a tussle between pension regulators, landlords and executives over the future of the UK chain.
The UK’s Pension Protection Fund, an industry-backed lifeboat that is now expected to bail out the retailer’s stricken pensioners, threatened in December to block a restructuring plan that involved closing at least a quarter of its 105 UK stores.
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