Woolworths fell into administration on Wednesday, putting 30,000 jobs at risk and marking the bleakest day so far for retail in the financial crisis.
But there was some hope on Thursday morning that at least a portion of the chain might be saved in some way after Deloitte, the administrator, confirmed that it had hired Hilco to manage the retail business.
Hilco, the restructuring specialist, had in recent days been trying to buy Woolworths’ retail division for a nominal sum and assume part of the retailer’s £385m of debt in an effort to save the chain from administration, but their proposal was rejected by lenders.
Appointing Hilco to run the retail arm on Thursday, Deloitte sought to reassure customers and staff that it was business as normal, at least for the time being. “Stores will remain open past Christmas and employees in stores will be paid,” it said.
The administrator said Hilco would manage the stores on a day-to-day basis as it sought buyers for all or part of the chain.
“In the last 24 hours we have received expressions of interest from a number of parties for both the retail and wholesale business. We are working hard to ensure that any sale of the business, in whole or part, will preserve jobs,” it said.
The troubled variety store chain went into administration after it failed to obtain sufficient backing from its banks to weather a cash crisis and directors met to appoint Deloitte as administrator just after MFI, the struggling kitchen seller, which employs about 2,000 people, also filed for administration.
As consumer spending and credit availability tightens, smaller retailers have already failed but Woolworths’ collapse is the biggest retail administration in the UK for many years, according to analysts, and comes as surviving retailers wage an increasingly desperate promotional battle to attract shoppers.
The decision to appoint administrators came in spite of late moves by the government and BBC Worldwide, which seemed to offer hope that the group could be salvaged.
It emerged that the government had called in Woolworths’ creditors and directors to discuss the situation on Tuesday night, prompting the parties to return to the negotiating table for talks into the early hours. Burdale and GMAC are the lead creditors to Woolworths’ £385m facility.
However, no taxpayer support was offered to prop up Woolworths. The retailer’s slow decline is seen by the government as symptomatic of the failings in its business model, rather than a fall-out from the credit crunch.
The BBC’s commercial arm, meanwhile, offered in principle to pay more than £100m for Woolworths’ share of a DVD publishing joint venture, which would have reduced the group’s borrowings and paved the way for a restructuring deal with Hilco UK.
Ultimately, however, not enough financing was available to support the proposal and the board decided it had no option but to pull the plug.
The 2entertain DVD publishing joint venture with the BBC is being held outside administration in the expectation that the broadcaster will complete its deal to buy the stake.
In a statement issued to the stock exchange on Thursday Woolworths said discussion with BBC regarding its 40 per cent stake in 2 Entertain were ongoing.
Additional reporting by Anousha Sakoui, Ben Fenton and Peter Thal Larsen