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Woolworths enters administration Work starts on Woolworths' rescue
(about 2 hours later)
Administrators are to begin working at Woolworths after its board agreed to call them into the ailing UK retailer. Woolworths' administrators have begun efforts to rescue the retailer, after it said its business could no longer operate as a going concern.
All 815 stores will stay open for now, but 30,000 jobs are at risk after the chain buckled under its £385m debt.All 815 stores will stay open for now, but 30,000 jobs are at risk after the chain buckled under its £385m debt.
Deloitte was last night appointed as administrator to the High Street store and also to Entertainment UK, which supplies DVDs to supermarket groups. Deloitte was last night appointed as administrator and says there are "expressions of interest" for the retail and wholesale businesses.
Furniture chain MFI is also going into administration after suffering several years of financial trouble. Furniture chain MFI is also going into administration.
'Interest'
Deloitte said the search is on a suitable buyer for all parts of the business.
WHAT IS ADMINISTRATION? A rescue mechanism for UK companies in severe trouble. It allows them to continue as a going concern, under supervision, effectively to try to trade out of difficulty. Credit crisis glossary
"In the last 24 hours, we have received expressions of interest from a number of parties for both the retail and wholesale businesses," said Dan Butters, who works for the administrator.
The company had tried to sell itself for a nominal price of £1 to Hilco, a restructuring firm, which would take on the firm's debt, but this deal fell through.
Deloitte said the company would stay open past Christmas and Woolworths' employees in stores will be paid.
Woolworths' 800 stores and four distribution centres employ 25,000 staff while Entertainment UK - which supplies DVDs to supermarket group - employs about 5,000.
Struggle
The company has had cash flow problems and struggled under the weight of its £385m of debt.
Its problems were compounded over the past couple of months when it was forced to pay cash when buying goods from suppliers, because trade credit insurers were no longer prepared to insure suppliers to Woolworths.
See how Woolworths' shares plunged during the past year
Woolworths' joint venture with BBC Worldwide - publisher 2 Entertain - will not go into administration as it is owned by Woolworths' parent company.Woolworths' joint venture with BBC Worldwide - publisher 2 Entertain - will not go into administration as it is owned by Woolworths' parent company.
Money has also been ring-fenced so that salaries will be paid to Woolworths' 25,000 staff as normal on Friday, a spokeswoman added.
A further 5,000 are employed by Entertainment UK.
WOOLWORTHS FACTS First UK store opened in Liverpool in 1909Has 815 stores across the UKOwns 40% share of publisher 2 EntertainOwns distribution business Entertainment UK What is the point of Woolworths?Robert Peston's analysisWOOLWORTHS FACTS First UK store opened in Liverpool in 1909Has 815 stores across the UKOwns 40% share of publisher 2 EntertainOwns distribution business Entertainment UK What is the point of Woolworths?Robert Peston's analysis
Woolworth said that it remained in talks to sell 2 Entertain to the BBC's commercial arm.
Government help?
BBC business editor Robert Peston says that Woolworths has been something of a lame duck retailer for years, losing market share against intense competition.BBC business editor Robert Peston says that Woolworths has been something of a lame duck retailer for years, losing market share against intense competition.
The company's weak position was also the reason why the government did not intervene to rescue it. The government is unlikely to intervene to prop up a company in such a weak position.
"Government policy is not to prop up lame ducks," our correspondent said."Government policy is not to prop up lame ducks," our correspondent said.
Employment Minister Tony McNulty said Jobcentre Plus was ready to help anyone who lost their jobs, but cautioned that people should "wait and see" over the scale of losses.
Lord Mandelson, the business secretary, was in contact with the company on Wednesday, to ensure that if it went into administration, it would minimise the anxiety to its employees.
The company has been asked to do what it can to protect its pension fund, and keep its stores open if possible during the vital Christmas period.
The UK's Woolworths has no connection with several retail chains around the world that carry the same name.The UK's Woolworths has no connection with several retail chains around the world that carry the same name.
See how Woolworths' shares plunged during the past year
High Street trouble
Meanwhile, MFI had asked its landlords for a rent-free period to help sort out its financial problems.
But the company, which has more than 1,000 staff, failed to reach an agreement.
MFI had suffered several years of financial trouble.
Last September, as part of a management buy-out led by chief executive Gary Favell, 81 loss-making outlets were placed into administration.
Now the remaining 110 stores could face closure.
The shopworkers' union Usdaw said the news on Woolworths was "devastating" for staff.
BBC business editor Robert Peston: "Woolworths was weak for years"
The company has struggled under the weight of £385m of debt.
Its problems were compounded over the past couple of months when it was forced to pay cash when buying goods from suppliers, because trade credit insurers were no longer prepared to insure suppliers to Woolworths.
During the past few days the company had tried to sell itself for a nominal price of £1 witj the new owner taking on the firm's debt.
Earlier this week, Woolworths' largest shareholder - property tycoon Ardeshir Naghshineh - had called on Woolworths to delay plans to sell parts of the business.
Mr Naghshineh said the firm should instead look at making money by selling off some of its outlets.
In the end Woolworths' board ran out of time.
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Do you work for Woolworths? Are you a shareholder? What are your thoughts on this story? Send us your comments using the form below:Do you work for Woolworths? Are you a shareholder? What are your thoughts on this story? Send us your comments using the form below:
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