Woolworths continue crisis talks

Well-known retailer Woolworths is in crisis talks with its two main banks to prevent it from falling into administration.

According to sources familiar with the situation, Woolworths is running out of cash amid challenging conditions in the retail industry, and it is believed that the company only has sufficient funds to last until about the middle of December.

The talks are being led by Steve Johnson, Woolworths chief executive, and Paul McGowan, Hilco’s chief executive.

For some time now, the retailer has been struggling as it faces competition from large supermarkets and the internet.

Shares in the retailer have plummeted by 92% in the last year (falling 32% on Friday) and it has debts of £385 million.

Woolworths’ lenders, a consortium led by GMAC and Bank of Ireland subsidiary Burdale, rejected and offer from Hilco, the restructuring company, last week who offered to buy the shops for £1 and take on approximately £265 million of the group’s debts.

Woolworths, which has been around for nearly 100 years, has 840 high street shops and a workforce of 30,000. It would still be at risk of falling into administration if a deal is not reached in the next few days.

According to a report in the Sunday Times, Hilco has made a further offer over the weekend to now assume £300 million of the group’s debts.

If Hilco is successful, it would retain approximately 250 Woolworths stores and sell off the remainder to supermarket chains or High Street rivals.

However, Woolworths’ major shareholder, property tycoon Ardeshir Naghshineh, who holds a 10.2% stake, is battling to keep Woolworths independent.

In September, Woolworths announced a record first-half pre-tax loss of £90.8 million and scrapped its dividend.

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