BHS owners 'took £30m' out of department store as it was going bankrupt

New claims emerge about the cash Retail Acquisitions extracted in their year of ownership of the business

Ben Chu
Monday 25 April 2016 17:31 BST
(Getty Images)

The owners of BHS, the 88-year-old department store chain that collapsed into administration today, have been accused of sucking £30m in cash out of the company in a single year of ownership.

It had previously been known that Retail Acquisitions, led by Dominic Chappell, had taken £8.2m in loans from BHS. But sources today said a host of management charges, legal fees, interest payments, salaries and wages over the past 12 months meant the true level of cash extraction was considerably higher.

“If you add up all the money wasted on fees and advisers you wouldn’t be far short of £30m” a source with knowledge of the company told the Independent.

Retail Acquisitions, a group of entrepreneurs and financiers with no retail experience, bought BHS for a nominal sum of £1 from the retail magnate Sir Philip Green in March 2015. The group is believed to have had around £74m of cash on its balance sheet at that time.

Retail Acquisitions called in the administrators Duff & Phelps today after failing to secure a £60m funding lifeline for the department store chain, putting 11,000 jobs at risk. It is the biggest high street failure since Woolworths went bust in 2008.

Speaking to journalists today Mr Chappell, a former bankrupt who owns 90 per cent of Retail Acquisitions, said: “No one is to blame. It was a combination of bad trading and not being able to raise enough money from the property portfolio”. But in a reference to the £571m deficit in BHS’s defined benefit pension scheme Mr Chappell added: “In the end we just couldn’t reach an agreement with Arcadia over pensions”.

Sir Philip, whose Arcadia Group owns brands such as Topshop and Miss Selfridge, is believed to be in negotiations with the Government’s Pensions Regulator about how much the former BHS owner will need to contribute towards the state-underpinned bailout of the scheme. Sir Philip has reportedly offered £80m, including writing off a £40m loan to BHS, but the Regulator is thought to be demanding more.

In a letter to BHS staff yesterday Mr Chappell, a former racing driver and property developer, said: “I would like to say it has been a real pleasure working with all of you on the BHS project, one I will never forget, you all need to keep you heads held high, you have done a great job and remember that it was always going to be very, very hard to turn around.”

In a statement, Duff & Phelps said: “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.”

Duff & Phelps is already said to have received more than 30 expressions of interest in buying parts of BHS, free of its pension scheme.

Mr Chappell and Retail Acquisitions did not immediately respond to requests for comment.

The business minister Anna Soubry made a statement to Parliament this evening telling BHS staff that if they found themselves at risk of redundancy “the Government stands ready to offer its assistance, including through Jobcentre Plus’ Rapid Response Service, to help people move into new jobs as quickly as possible”.

The Conservative MP Richard Fuller said there was a reputation issue for Sir Philip Green to answer in relation to BHS and the pension scheme. “If that [2015] sale was done on the understanding that he was avoiding a responsibility for those pension losses, then £1 was equivalent to 30 piece of silver for that betrayal of the employees and pensioners” he said.

The Labour MP Ian Wright was also critical of Sir Philip, who was knighted in 2006 for services to retailing. “How an owner runs the business is up to them but when 11,000 jobs are under threat and the taxpayer may be liable for substantial pension liabilities, something is gravely wrong” he said.

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