McColl’s Retail Group, one of Britain’s biggest convenience store chains, is on the brink of collapse, putting thousands of high street jobs at risk.
Sky News has learnt that McColl’s, which has an extensive national partnership with the supermarket giant Morrisons, could call in administrators as early as Friday.
The company’s imminent collapse is expected to spark renewed interest in a partial takeover from both Morrison’s and EG Group, the petrol retailing giant owned by TDR Capital and the billionaire Issa brothers Mohsin and Zuber.
Retail industry sources said on Thursday that the situation remained fluid but a collapse into some form of insolvency proceedings was now more likely than not.
One cautioned, however, that a rescue deal did remain possible and said that ongoing talks about McColl’s future could mean that the appointment of administrators was delayed beyond the end of this week.
Sky News reported in February that McColl’s was scrambling to secure new funding that would allay concerns about its future.
The company, which is listed on the London Stock Exchange, employs about 16,000 people, or roughly 6,000 on a full-time equivalent basis.
It raised £30m from shareholders in a cash call just eight months ago.
McColl’s trades from approximately 1,100 convenience stores and newsagents across Britain, with about 200 of them now trading under the Morrisons Daily format through a partnership with the supermarket giant.
In Scotland, it trades under the name RS McColl.
Earlier this week, it warned that its shares would be suspended at the end of May because it would be unable to meet a statutory deadline for filing its annual results.
Morrisons is said to have proposed a rescue deal to McColl’s lenders in recent weeks that would have involved its banks taking a haircut on their debt, with the supermarket chain injecting new capital.
That proposal is not thought to have gained traction, although a revised version of it could yet emerge, according to insiders.
Administrators are said to have been put on standby to oversee the collapse of McColl’s, although it was unclear on Thursday evening which firm would secure the appointment.
In November, McColl’s announced that it would expand the number of Morrisons Daily conversions from 350 to 450 within a year.
If McColl’s is forced into administration, it would be the largest insolvency in the UK retail sector by size of workforce since the collapse of Edinburgh Woollen Mill Group in 2020.
Since then, both Debenhams, which employed about 12,000 people, and Sir Philip Green’s Arcadia Group, which had a workforce numbering roughly 13,000, have also gone bust, becoming casualties of changing retail shopping habits and the pandemic.
McColl’s shares have collapsed this year, and the entire company is now worth less than £3.5m.
The company carries debts of almost £170m, with a lending syndicate that has included Barclays, HSBC, NatWest Group and Santander UK.
Jonathan Miller, McColl’s recently departed chief executive, said in December that the financial year had “undoubtedly been a tough year for the business, starting with the impact of COVID-19 restrictions and ending with the widely reported and ongoing supply chain challenges”.
“Although we have been able to partly mitigate these external factors, they have still had a significant impact on underlying trading,” he added.
Mr Miller is understood to have invested £3m personally in the fundraising last summer in a bid to convince other shareholders to support the company.
McColl’s said in a statement: “As previously disclosed on 25 April 2022, the Group remains in discussions regarding potential financing solutions for the business to resolve short term funding issues and create a stable platform for the business going forward.
“However, whilst no decision has yet been made, McColl’s confirms that unless an alternative solution can be agreed in the short term, it is increasingly likely that the Group would be placed into administration with the objective of achieving a sale of the Group to a third-party purchaser and securing the interests of creditors and employees. Even if a successful outcome is achieved, it is likely to result in little or no value being attributed to the Group’s ordinary shares.”
Morrisons declined to comment, while EG Group has been contacted for comment.