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Convenience chain McColl’s has confirmed it will collapse into administration, putting 1,100 shops and 16,000 workers at risk.
The troubled retailer held talks with its lenders on Friday morning in the hope they could extend their loan agreements.
Supermarket giant Morrisons, which is a major wholesale partner, also tabled a last-ditch effort to buy the business, which it said would have “kept the vast majority of jobs and stores safe”.
However, the company confirmed “the lenders made clear that they were not satisfied that such discussions would reach an outcome acceptable to them”.
It said the company will now appoint administrators from PwC in an effort to “preserve the future of the business and to protect the interests of employees”.
For thousands of hardworking people and pensioners, this is a very disappointing, damaging and unnecessary outcome
The company said it hopes the administrators will help to “implement a sale of the business to a third-party purchaser as soon as possible”.
It is understood that EG Group, whose owners bought Asda for £6.8 billion early last year, are favourites to buy the company from administration.
The PA news agency understands that EG intends to keep all of McColl’s stores.
An insolvency sale could take place as soon as Monday.
Earlier on Friday, Morrisons tabled a rescue deal which would have taken on the business as a going concern, absorbed its debts of over £100 million and taken responsibility for the company’s pension scheme.
The two businesses are major partners, with McColl’s operating hundreds of convenience shops under the Morrisons Daily brand.
Morrisons, which was bought by a US private equity firm last year, said the administration is a “disappointing” outcome.
A spokeswoman said: “We put forward a proposal that would have avoided today’s announcement that McColl’s is being put into administration, kept the vast majority of jobs and stores safe, as well as fully protecting pensioners and lenders.
“For thousands of hardworking people and pensioners, this is a very disappointing, damaging and unnecessary outcome.”
McColl’s has struggled financially in recent years after witnessing soaring costs due to supply chain disruption, inflation and its large debt burden.
On Thursday evening, McColl’s had said it was in talks over “potential financing solutions” to resolve its funding issues.
Shares in McColl’s were suspended earlier this week after the company delayed the publication of its latest financial results due to its financing talks.
A spokesman for the trustee of the McColl’s pension schemes warned staff could miss out on payments following administration and urged any new owner to protect the schemes.
The said: “The pension schemes are significant stakeholders in the company, and the trustees call on all potential bidders to make clear that they will respect the pension promises made to the 2,000 members by McColl’s and its subsidiaries, and will not seek to break the link between the schemes and the company.”
The trustees added: “Breaking the link between the schemes and the sponsor company, by way of a pre-pack administration, would represent a serious breach of the pension promises made to staff who have served the business loyally over many years, and risks causing the schemes to enter the Pension Protection Fund with a resulting reduction in benefits.”
The insolvency announcement also caused Smiths News shares to plunge on Friday .
Smiths, which supplies magazines and newspapers to around 600 McColl’s stores, said it has a bad debt risk of between £6 million and £7 million in relation to McColl’s, with £1.2 million currently overdue from the convenience retailer.