Wilko calls in administrators

November 2023 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

November 2023 Issue

UK retail chain Wilko filed for administration in August after months of teetering on the brink of financial collapse.

Wilko, which was founded in the 1930s in Leicester and grew to 400 stores, has been struggling for some time. The company’s cash flow issues became evident last year when it deferred supplier payments and asked landlords to move to monthly rents. It also suffered a major blow when credit insurers Allianz Trade and Atradius pulled cover in October 2022, which made life difficult for Wilko when many suppliers demanded payment for goods upfront, leading to poor availability across its stores.

To turn the company’s fortunes around, Wilko secured £40m in funding from restructuring specialist Hilco in late 2022, and appointed a new chief executive, Mark Jackson, who sought to cut costs and rebuild funds by cutting more than 400 jobs and selling its Worksop distribution centres.

Despite these efforts, in early August the company appointed PwC to lead its administration process, placing 12,000 jobs at risk. The retailer had been trying to broker a solvent rescue deal since it filed a notice of its intention to appoint an administrator. Shortly before the administrators were called in, Gordon Brothers, Alteri Investors and Opcapita were examining last-ditch proposals to invest in the business. Likewise, M2 Capital, Poundland’s parent company and B&M European Value Retail were all interested in acquiring the company.

At the time of PwC’s appointment, PwC partner and joint administrator Zelf Hussain said: “We know that the appointment of administrators, which comes during an already challenging time for many, will be an unsettling development for everyone involved with the business – particularly its committed team members – and the communities it serves. As administrators we will continue to engage with parties who may be interested in acquiring all or part of the business. Stores will continue to trade as normal for the time being and staff will continue to be paid.”

“Since January and with the help of retail advisers and experts, we’ve been facing into problems and have seen real progress against many areas of our plan,” said Mr Jackson. “We’ve made significant savings across our cost base and have been considering various options based on advice given regarding our store costs. We’ve all fought hard to keep this incredible business intact but must concede that time has run out and now, we must do what’s best to preserve as many jobs as possible, for as long as is possible, by working with our appointed administrators.”

The company rose to prominence in the UK in the late 2000s following the closure of Woolworths, however it has been significantly impacted by the growth of other discount retailers, including B&M, The Range and Home Bargains, all of which have surpassed Wilko for non-food market share with Wilko the only one of these retailers not to gain share over this period, according to GlobalData. Wilko recorded sales declines in its last four financial years, with revenue falling by 18.6 percent between 2017-18 and 2021-22. Meanwhile, the £35.9m loss it made in its last financial year was more than its operating profit from the previous four years.

Several potential rescue bids for the company have been launched since administrators were called in. Private equity firm M2 Capital confirmed it made a £90m bid for the business and pledged to retain all employees’ jobs for two years. The owner of HMV, Canadian businessman Doug Putman, also expressed interested in salvaging some of the business. Mr Putman intended to acquire more than 300 of its 400 stores, meaning that between 8000 and 9000 jobs could be saved.

In late August, it was announced that any potential redundancies had been suspended while rescue bids for the business were being considered, though PwC did confirm the first redundancies since its appointment when it announced that 283 jobs would be lost, mainly at its support centre operations.

Richard Summerfield