Peacocks calls in the administrators as rescue fails

Peacocks, the debt-laden discount fashion chain, collapsed into administration yesterday, leaving about 9,600 jobs hanging by a thread in the retail sector's biggest failure since Woolworths in 2008.

Richard Kirk, the chief executive of the group behind the 611-store chain, had submitted a £60m rescue package on Sunday, with a mystery backer to salvage the 128-year-old retailer.

But the deal collapsed after its 17 banks raised a series of issues – notably on price, which could not be addressed before Friday. As a result, the Peacock Group appointed KPMG as administrator yesterday. Mr Kirk said: "Peacocks is a brand with great heritage, and it is with deep sadness that we have been left with no other option but to today place the business into administration." Peacocks, which also has 49 concessions, will continue to trade while KPMG seeks to find a buyer for the business.

The fashion group's sister chain, Bonmarché, the clothing retailer that employs 3,800, is not in administration.

Bonmarché is poised to be sold to the private equity firm Sun European Partners, possibly in a pre-packaged administration this week. Sun European has teamed up with the restructuring specialist GA Europe, which both declined to comment, for the deal. Sun European is likely to acquire 230 Bonmarché shops, while GA Europe is set to handle the sale or closure of the remaining 164 stores.

Chris Laverty, a restructuring partner at KPMG, said: "Like many retailers, Peacocks has suffered from tough economic conditions, which have seen its customers reduce their spending on the high street. This factor, combined with a surplus of stores and high overheads, led to the business becoming financially unviable in its current form."

However, the fate of Peacocks was largely sealed by the group's debt of £240m, following a highly leveraged buyout in 2006. After its acquistion of Bonmarché in 2002, Peacocks was taken off the stock market in a £420m deal, backed by the hedge funds Och-Ziff and Perry Capital, and Goldman Sachs, four years later. Private equity firms and retail restructuring specialists are expected to be interested in buying Peacocks, as the administration will allow them to ditch its worst stores and debts.