McColl’s Retail Group, one of Britain’s largest convenience store chains, is racing to secure new funding to avert a collapse that could put thousands of jobs at risk.
Sky News has learned McColl’s is working with advisers to try to find a buyer or third parties willing to inject new capital into the business.
City sources said over the weekend that McColl’s had weeks to secure new funding, with millions of pounds of its bank debt being sold to hedge funds and few obvious options to secure its future.
EG Group, the petrol station giant controlled by Mohsin and Zuber Issa and private equity firm TDR Capital, reportedly had talks to make an offer for McColl’s but decided against it earlier this week, according to sources. people close to the process.
The company, listed on the London Stock Exchange, employs around 16,000 people, or around 6,000 full-time equivalent.
He raised £30m from shareholders in a cash call just six months ago.
McColl’s trades in around 1,100 convenience stores and newsagents across Britain, of which around 200 now trade in the Morrisons Daily format thanks to a partnership with the supermarket giant.
Wm Morrison, who last year agreed to a £7billion sale to private equity firm Clayton Dubilier & Rice, is said to be watching McColl’s situation closely with a view to possibly acquiring hundreds of its stores out of insolvency.
He is not, however, believed to be in active discussion of a company-wide takeover bid.
In November, McColl’s announced that it would increase the number of Morrisons Daily conversions from 350 to 450 in one year.
If McColl’s fails to secure new funding and is forced into administration, it would be the UK’s largest retail sector insolvency by workforce size since the collapse of ‘Edinburgh Woolen Mill Group in 2020.
Since then Debenhams, which employed around 12,000 people, and Sir Philip Green’s Arcadia Group, which had around 13,000 employees, have also gone bankrupt, falling victim to changing retail shopping habits and the pandemic.
McColl’s has endured scorching trading conditions and now has a market capitalization of less than £20m.
The company carries debt of nearly £170m, with a lending syndicate that includes Barclays, HSBC, NatWest Group and Santander UK.
In recent weeks, however, some of its banks have traded the debt, with hedge fund Silver Point among those buying into it.
Retail industry sources said McColl’s shares were now effectively “worthless” and a pre-pack administration or other forms of insolvency increasingly looked like the most likely outcome.
People close to the company expressed the hope this weekend that a solvent solution could still be found.
McColl’s lenders are advised by PricewaterhouseCoopers, while Stephens Europe, a corporate finance firm, is leading the search for additional capital.
The company has told investors it will release its full-year results at the end of March, and an extension of its timeline to secure new funding is possible if its lenders support such a move.
Jonathan Miller, McColl’s chief executive, said in December that the financial year had “undoubtedly been a difficult year for the business, starting with the impact of COVID-19 restrictions and ending with challenges for the chain. widely reported and continuous supplies”.
“Although we were able to partly mitigate these external factors, they still had a significant impact on the underlying trading,” he added.
Mr Miller is said to have personally invested £3m in fundraising last summer in a bid to convince other shareholders to back the company.
McColl’s shares closed at 7 p.m. Friday, having fallen nearly 70% in the past year.
A company spokesperson declined to comment.