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Work starts on Woolworths' rescue Work starts on Woolworths' rescue
(about 1 hour later)
Woolworths' administrators have begun efforts to rescue the retailer, after it said its business could no longer operate as a going concern. Woolworths' administrators have begun efforts to rescue the chain, after the firm said its retail stores 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 and says there are "expressions of interest" for the retail and wholesale businesses. Administrators Deloitte said there had been "expressions of interest" for the stores and for the Entertainment UK wholesale business.
Furniture chain MFI is also going into administration. The MFI furniture chain has also gone into administration.
'Interest''Interest'
Deloitte said the search is on a suitable buyer for all parts of the business. Woolworths' joint venture with BBC Worldwide - publisher 2 Entertain - has not been put into administration. The firm said it remained in talks to sell 2 Entertain to BBC Worldwide, the BBC's commercial arm.
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. class="" href="/1/hi/magazine/7642138.stm">Credit crisis glossary Deloitte said the search was on for a suitable buyer for Woolworths' stores and the Entertainment UK business, which supplies DVDs to supermarket groups.
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 glossaryRead Robert Peston's blog
"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."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. The company had tried to sell itself for a nominal price of £1 to Hilco, a restructuring firm, which would have taken 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. Deloitte said the company would stay open past Christmas and Woolworths' employees in stores would 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. Woolworths' stores and four distribution centres employ 25,000 staff, while Entertainment UK employs about 5,000 people.
Struggle
The company has had cash flow problems and struggled under the weight of its £385m of debt.
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?Read Robert Peston's blog
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.
Woolworths' joint venture with BBC Worldwide - publisher 2 Entertain - will not go into administration as it is owned by Woolworths' parent company.
Woolworth said that it remained in talks to sell 2 Entertain to the BBC's commercial arm.
See how Woolworths' shares plunged during the past yearSee how Woolworths' shares plunged during the past year
Government help? 'Eye of storm'
BBC business editor Robert Peston says that Woolworths has been something of a lame duck retailer for years, losing market share against intense competition. Woolworths is not the only retailer suffering in the current climate. Analysts think more companies could face collapse.
The government is unlikely to intervene to prop up a company in such a weak position. "The eye of the storm has moved on from the banks to the retailers," said Keith Bowman, an analyst at Hargreaves Lansdown Stockbrokers.
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  • Furniture chain MFI has also gone into administration. It blamed falling demand for big ticket items, cash-flow problems and the withdrawal of credit
  • The owner of Currys and PC World, DSG International, has reported a half-year loss of £29.8m, blaming a "tough and volatile" trading environment
  • Retail group Kingfisher said sales at its B&Q home improvement chain were down nearly 9% amid the slump in consumer spending and the housing market
"Government policy is not to prop up lame ducks," our correspondent said. There are also fears that Woolworths' demise could spark a price war if the administrators slash prices to shift the company's stock.
The UK's Woolworths has no connection with several retail chains around the world that carry the same name. BBC business editor Robert Peston said this would be good news for shoppers but could be devastating for weak competitors.
Struggle
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?
Woolworths had cash flow problems and struggled under the weight of its £385m of debt.
Its problems were compounded in 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.
Robert Peston said that Woolworths had been one of the UK's weakest retailers for years.
But the sudden deterioration in the real economy and financial markets had triggered its demise.
"It's the suddenness of how everything turned bad that shocks and this means Woolies will not be the last casualty," he said.
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