Poundworld future uncertain as buyer leaves rescue talks

● Not all is doom and gloom in retail as Carpetright and Hornby secure funding

The future of discount retailer Poundworld is hanging in the balance after a buyer walked away from talks to rescue the business.

It was not all doom and gloom for retailers yesterday, however, as fears that Poundworld may have to call in administrators within days due to a lack of cash came as flooring firm Carpetright secured a £60 million lifeline from investors and troubled toymaker Hornby agreed a new financing package with its lenders.

Talks between Poundworld’s private equity owner, TPG Capital, and potential buyer Alteri Investors came to a halt, with administrators on stand-by to take over the business. However, the firm’s management insists that it is in talks with other potential buyers, and it is thought that Poundworld’s founder, Chris Edwards, might take on the company once again.

However, the retailer’s advisers at Deloitte are understood to be preparing contingency plans for an administration should talks collapse.

It has been claimed during the sale process, which is being steered by Poundworld’s lender Santander, that the retailer has rejected offers to buy the business through a pre-pack administration. However, with Alteri walking away from its bid, a sale through a pre-pack administration is still possible. Poundworld’slosseswidenedin201617 to £17.1m, from £5.4m of losses the year before.

The retailer was hit with a £5.7m charge for onerous leases, a provision retailers make when the cost of a lease is no longer covered by the income of the store.

Several retailers have shown significant financial distress this year, with both Maplin and Toys R Us disappearing from the high street.

Restaurant groups including Carluccio’s, Prezzo and Byron have been shutting dozens of stores as they are squeezed by rising costs and a fall in consumer spending, while in addition, Carpetright, Mothercare and New Look have all undertaken sweeping store closure programmes.

Carpetright yesterday confirmed a successful placing of new shares issued to raise the emergency cash as it pushes through a painful restructuring. It comes after the firm recently secured a company voluntary arrangement (CVA) – an insolvency procedure allowing the retailer to shut 81 stores and secure rent reductions on others.

Meanwhile Hornby – best known for its model railways and Scalextric car race tracks – looks to stage a turnaround after hefty losses and falling sales after it said it had agreed a lending deal worth up to £18m to support the strategy of rebuilding the brands.

It comes amid an overhaul being led by chief executive and interim chairman Lyndon Davies, who was forced to take on both roles after previous interim chairman David Adams quit to take up another appointment. The group revealed talks over the lending package in April as it said it needed more cash.