BHS administrator locked in tug-of-war with chain’s top creditor

Administrators to BHS have lodged a furious protest against a move to force them to begin liquidating the collapsed retailer within days, accusing its biggest creditor of jeopardising efforts to complete an orderly wind-down.

Sky News has obtained a copy of a progress report produced by Duff & Phelps, BHS's joint administrator, which lays bare the scale of its dispute with the Pension Protection Fund (PPF), the lifeboat now responsible for paying retirement funds to thousands of former BHS employees.

In the report, which was finalised last Friday and is expected to be made public in the coming days, Duff & Phelps argues that transferring SHB Realisations Limited - previously BHS Limited - from administration to liquidation would reduce overall returns to creditors.

It also reveals that unsecured creditors can expect to receive a maximum of just 8p in the pound following the biggest British high street collapse since Woolworths nearly a decade ago.

The PPF has asked for liquidation to begin by November 24, although the move could yet slip into next week, with FRP Advisory - the other joint administrator - then taking over as the sole liquidator.

BHS collapsed in April, triggering roughly 11,000 job losses and a bitter political battle aimed at securing a pension bailout likely to cost Sir Philip Green, its former owner, well over £300m .

The billionaire has been embroiled in a battle with administrators over a £35m charge held by his Arcadia Group over BHS.

Duff & Phelps' update refers to confirmation by DLA, a law firm, of the validity of that charge, but warns:

"We understand that the Concurrent Administrators are investigating additional matters which they say may impact on the validity."

Dated November 18, the report said the "substantial knowledge and relationships since the appointment date which would result in better realisations and/or lower costs when finalising matters" meant liquidating SHB was not yet appropriate.

It cited the collection of debts, ongoing claims against Visa (Xetra: A0NC7B - news) and Mastercard (Swiss: MA.SW - news) over interchange fees and "concession trust monies" as reasons to delay the liquidation.

"The Joint Administrators have had success in achieving surrenders in full and final settlement resulting in the saving of many millions of £'s in both expenditure and unsecured claims.

"CVL (Creditors Voluntary Liquidation) might be necessary to finalise certain property issues but it is not imperative at this stage," the report said.

Duff & Phelps also argued that handing to a liquidator a number of "complicated and unresolved trading issues" where the Joint Administrators were acting for the counterparty would "increase the settlement risk and increases costs".

In addition, it said its investigations into Retail Acquisitions Limited, the vehicle of Dominic Chappell, who bought BHS from Sir Philip for £1 last year, were far enough advanced that replacing it with a new liquidator "makes no sense".

Sources said that an attempt to secure a fee increase for the administrators from £4.2m to just under £5.3m, led by Duff & Phelps, had been blocked by creditors.

The PPF disputed the argument that its efforts to force BHS into liquidation would diminish creditors' returns.

In a statement issued to Sky News, Malcolm Weir, the PPF's head of restructuring and insolvency, said: "We are intent on securing the best possible recovery on behalf of the pension schemes from the insolvent company.

"Given that the company has not traded since August, we believe a liquidator will be able to progress all remaining issues at least as quickly as the current administrators, including the remaining leases and the ongoing investigatory work.

"This will expedite the investigations and reduce costs, and it is therefore in the interests of pension scheme members and our levy-payers to do this promptly."

An excoriating report by two committees of MPs (BSE: MPSLTD.BO - news) concluded during the summer that Sir Philip bore much of the responsibility for BHS's travails after opting to sell it to a "manifestly unsuitable" buyer in the shape of Dominic Chappell, a former bankrupt.

A subsequent non-binding vote in the House of Commons suggested that he should be stripped of his knighthood, while The Pensions Regulator recently issued formal warning notices to Sir Philip, the parent company of his Arcadia Group, and to Mr Chappell.

The tycoon, who owns TopShop and other leading high street names, has responded furiously to criticism led by the Labour MP Frank Field, whose Work and Pensions Committee will take evidence on Wednesday from Lesley Titcomb, chief executive of The Pensions Regulator.

In a letter to Ms Titcomb, Mr Field sought clarification over the watchdog's powers to acquire "assets other than cash from a person or company from which payment is being sought".

The PPF estimated in May that the cost to it of meeting BHS pensioners' retirement payments at the discounted level it provides would be at least £275m, although that figure is thought to have since risen to somewhere in the region of £320m.