Peacocks clothing firm launches search for new investor
Efforts are being made to find a new investor to save one of the biggest companies in Wales from administration.
Clothing retailer Peacocks has 10 days' protection from its creditors to find a new investor or it will go into administration due to debts of £240m.
Cardiff Central MP Jenny Willott is due to meet Business Secretary Vince Cable later to discuss the retailer's problems.
And the issue is due to be discussed in the Senedd with concerns being raised.
The retailer employs over 400 at its Cardiff HQ and 10,000 more across the UK.
Peacocks says it continues to make operating profits, but the group's overall financial performance has been weighed down by the level of its debts, which stem from a management buy out in 2006.
Talks with lenders, including Royal Bank of Scotland and Barclays have, so far, failed to find a solution.
Ms Willott said: "I'm deeply concerned. The number of jobs involved is just terrifying and it would hit Cardiff particularly bad.
Analysis by business correspondent Nick Servini
The company now has 10 days protection from its creditors which has been described as a stay of execution.
It has to find a new investor.
The plain fact of the matter was the best way out was to restructure the debts that it has with a number of institutions, most notably RBS and Barclays.
But in a statement last night the company said it had failed to do that and the only way now to avoid administration is an injection of new money.
The other statement last night was regarding Bonmarche, a considerable women's clothing business, confirming speculation that it was in "advance" talks with someone to buy that business and separate it from the Peacocks' group.
Peacocks is a viable business, it says, in that its stores are not losing money.
The problem is the levels of debt the company has. Its bank debt - its priority debt is £240m and while the group makes an operating profit it is weighed down by the interest payments.
And in recent years it makes a pre tax loss because any profit made is taken out by the interest payments on that debt.
"Peacocks is profitable and I think the banks need to be more socially responsible as well as financially responsible.
"There are a lot of people depending on these jobs."'Debt burden'
A spokesperson for one of its lenders, the Royal Bank of Scotland told BBC Wales on Sunday night that it had been and would continue to be supportive of the company.
Andrew RT Davies, leader of the Conservatives in the Welsh Assembly, has tabled an emergency question in the Senedd for the minister for business and enterprise.
"This is very worrying news and comes after an incredibly difficult trading period for many high street retailers," he said.
"With the head office of the Peacock Group based in Cardiff, distribution centres in Nantgarw, Merthyr Tydfil and Treorchy and with many stores in the area, the impact of this news could be devastating for the region.
"I have tabled an emergency question to the minister to ask what contact the Welsh government has had with the Peacock Group in light of this news."
Chris Parry, senior lecturer in banking and finance at Cardiff Metropolitan University, said Peacocks would not be unattractive to potential buyers or investors.
"Peacocks' last set of accounts showed at one level they were making a profit, but after you took out all the finance charges, they were making a loss. It just depends on how you measure the profit," he said.
End Quote Maureen Hinton Retail analyst
It has got a considerable share in the value clothing sector...”
"They're not unattractive. The Peacocks name itself has some value and, as the company said, they offer a good range of products, they're in a market that they're competitive [in], but the debt burden has been dragging them down.
"Without the debt they do look like a good bargain."
Peacocks has more than 600 stores and concessions in the UK, and 117 other stores around the world. Its expansion into Russia and eastern Europe was particularly successful.Success story
It also bought the Yorkshire-based retailer Bonmarche 10 years ago. The parent company said it would seek a potential buyer for Bonmarche, which includes some 394 stores, but would appoint an administrator in the meantime.
Maureen Hinton, a lead retail analyst at Verdict Research, described Peacocks as an "attractive" proposition for a potential buyer, apart from its debt.
"It has got a considerable share in the value clothing sector and it's nationwide," she told BBC Radio Wales.
"It would be very attractive for somebody to buy but not take the debt with it."
Shadow Treasury Minister Owen Smith MP, whose Pontypridd constituency includes one of Peacocks' major distribution centres employing 400 people, said the company was a British success story.
"This case also raises the issue of British banks' role in our modern economy and the short termism which seems so often to guide their behaviour," he said.