Thousands of high street jobs could be at risk as convenience store firm McColl's Retail Group is reportedly on the brink of collapse.
The chain, which has a partnership with the supermarket giant Morrisons, could be calling in administrators as soon as Friday, Sky News says. Reports say that the imminent collapse of McColl's could see both Morrison's and the EG Group, a petrol retailing giant, spark a new interest in a partial takeover.
On Thursday (May 5), sources say that although the situation regarding McColl's remains "fluid", a collapse in some form was more likely than not. However, one retail industry source highlighted that it's possible that a rescue deal could happen as there are ongoing talks about the future of McColl's.
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Sky News reports this could mean that "the appointment of administrators was delayed beyond the end of this week". In February this year, there were concerns over McColl's future as they were trying to secure new funding.
The convenient chain employs roughly 16,000 people with around 6,000 of these on a full-time equivalent basis. Eight months ago, it managed to raise £30 million from shareholders in a cash call
Across Britain, it trades from around 1,100 convenience stores and newsagents with about 200 of them now trading under the Morrisons Daily format. They warned at the start of the week that shares would be suspended by the end of May due to it being unable to meet a statutory deadline for filing its annual results.
According to Sky sources, a rescue deal was proposed by Morrisons to McColl's lenders. This would have involved its banks taking a haircut on their debt, with the supermarket chain injecting new capital. Although a revised version of it could still emerge, that specific proposal did not gain traction.
This year, the shares of McColl's have collapsed with the entire company only being worth £3.5m with debts of nearly £170m. In December, McColl's recently departed chief executive Jonathan Miller said it was "undoubtedly" a tough year for business.
He said: "Starting with the impact of Covid-19 restrictions and ending with the widely reported and ongoing supply chain challenges. Although we have been able to partly mitigate these external factors, they have still had a significant impact on underlying trading."
It's understood that the chief executive has personally invested £3m into the fundraising last summer. This was in an attempt to convince other shareholders to support the company.
In a statement, McColl's said: "As previously disclosed on April 25, 2022, the Group remains in discussions regarding potential financing solutions for the business to resolve short term funding issues and create a stable platform for the business going forward. However, whilst no decision has yet been made, McColl's confirms that unless an alternative solution can be agreed in the short term, it is increasingly likely that the Group would be placed into administration with the objective of achieving a sale of the Group to a third-party purchaser and securing the interests of creditors and employees.
"Even if a successful outcome is achieved, it is likely to result in little or no value being attributed to the group's ordinary shares. A further update will be made as and when appropriate."
Morrisons declined to comment, while EG Group has been contacted for comment.
