Poundland rescue deal in doubt as councils seek unpaid business rates
A rescue deal for Poundland has been thrown into doubt after the struggling high street chain was hit with a series of court claims for outstanding debts.
A string of local councils are pursuing the discount retailer over unpaid business rates, potentially piling further pressure on its already-stretched finances.
Sources close to sale talks for Poundland fear the overdue taxes, thought to be worth millions of pounds, could scupper attempts to safeguard the company's future by scaring away potential buyers.
It is understood that Poundland is hoping to write off the outstanding payments as part of a radical turnaround plan drawn up by management.
The company is also proposing a freeze on future business rates payments for as long as nine months if it ends up in the hands of new owners.
The plan also envisages between 150 and 200 store closures and steep rent cuts of between 10pc and 50pc on hundreds more. Poundland has more than 800 shops across the UK, employing 16,000 people.
The measures, designed to put the business on a firmer financial footing, are expected to be implemented via a court-sanctioned restructuring scheme. However, there is no guarantee that a judge will approve the proposal.
It comes after an auction of Poundland was whittled down to a shoot-out between the distressed investment funds Gordon Brothers and Hilco. Reports suggest Gordon Brothers, which owns Mothercare, is the frontrunner.
Poundland was put on the block earlier this year by its Polish owner Pepco after becoming an increasing financial burden.
Pepco crashed to a £548m loss in December after taking a £650m write-down on Poundland, as bosses blamed a 'significant decline in performance' and spiralling costs.
Last month, Pepco told investors not to expect 'major proceeds' from any sale of Poundland. It also warned that the chain might not make a profit in the forthcoming financial year.
The business continued to face 'highly challenging trading conditions' in the six months to the end of March, it said. Like-for-like sales were down 7.3pc and pre-tax earnings slumped three quarters to €22m (£18.6m).
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