Update: BHS has announced it is going into administration. The department store chain has released the following statement:
"Philip Duffy and Benjamin Wiles, managing directors at Duff & Phelps have today been appointed Joint Administrators of BHS. The group has been undergoing restructuring and, as has been widely reported, the shareholders have been in negotiations to find a buyer for the business. These negotiations have been unsuccessful.
In addition property sales have not materialised 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. Further announcements will be made as appropriate in due course."
In a letter to staff, BHS owner Dominic Chappell said, "It is with a deep heart that I have to report, despite a massive effort from the team, we have been unable to secure a funder or a trade sale."
The CVA was not enough to keep the business going but it did give it some breathing space to find time for an investor or buyer. Sports Direct was looking into it, but fundamentally it was not a good fit. The property portfolio was attractive but the stores were very large. In addition, the pension liability was regarded as just too great. It is possible that following an administration some of the stores will be picked up by various "cherry pickers" as many of the stores are in good locations. This will save some jobs.
BHS is the largest retailer to fail since Woolworths at the height of the financial crisis.
The High Street is one of the most fiercely competitive markets and the likes or Zara, Primark and a TK Maxx have been grabbing market share from BHS.
UPDATE: 23/03/2016 - The CVA has been approved by 95% of its creditors for 125 stores. The future of the remaining stores will be decided in a separate vote this afternoon. As part of their restructuring plans, they will also be aiming to raise millions in extra funding to keep the business running.
UPDATE - 04/03/2016: Directors have agreed to seek a CVA, which could see a number of stores being closed and rent leases negotiated. Creditors will vote on whether to approve or reject the CVA on the 23rd March. Will Wright and Brian Green from KPMG has been appointed supervisors and will work with directors and creditors over the next month to go through the proposal.
Wright said, "Today’s CVA proposals are one facet of a wider turnaround plan, and specifically tackle one of the business’ largest fixed costs, the onerous lease arrangements across its UK-wide store portfolio."
40 stores may eventually be closed, however negotiations will take place over the next year if the CVA is approved. Many more stores may see different payment patterns and a reduction in rent.
If the retailer doesn't go into a CVA, it has warned the company would have to appoint administrators and cease trading, resulting in creditors losing a staggering £1.3 billion. A CVA would benefit creditors the most as some would be able to recover all the money their owed while landlords would be paid back over half. If BHS went into liquidation, creditors could only get 0.05p back!
It's been reported this morning BHS will also make a third of its head office employees redundant as part of its plans to restructure in the CVA. They have started consultations this morning.
If you are an employee of the business, please listen to the video below as it will tell you your rights as an employee of an insolvent business. There is a link at the end of the video to the Government website which expands further on what you need to know.