Ailing sportswear retailer JJB has been given a month-long reprieve by its lenders, after spending most of this week teetering on the brink of collapse. The three banks have agreed to push back the refinancing deadline until March 16, in exchange for a £166,500 fee – which should give JJB enough time to flog its fitness clubs division, pay off its debts, and maintain its place on the high street. However, the same probably can’t be said for shoe stores Barratts and Priceless, whose owner Stylo has just collapsed into administration…
JJB owns £60m to HBOS, Barclays and Kaupthing, and has already been forced to beg several extensions to its repayment schedule (in exchange for crossing their palms with silver). With its latest expiry date looming, JJB is still in no position to pay up, which means the banks would be within their rights to pull the plug on the whole business. It’s already been forced to call in the administrators on its Lifestyle subsidiary, owner of the Original Shoe Company and Qube chains, whose losses were dragging the business some £10m into the red.
The sale of its profitable fitness clubs – arguably the crown jewel of the business – is expected to pay off most of that debt. But although there are several bidders sniffing around (Mike Ashley and founder Dave Whelan are both supposedly keen), nothing concrete has yet materialised. There was certainly no chance of pushing a sale through this week, except perhaps at a fire-sale price – and the banks have quite sensibly decided that it’s in everyone’s interests to give this process another month. Plus they get an up-front fee £166k and a balance of £8m next month, as a reward for their forbearance (might double Kaupthing’s assets, that).
No such luck for Stylo, however. Barratts’ parent company has collapsed into administration after failing to persuade creditors and landlords to let it enter a Company Voluntary Arrangement. Apparently it wanted landlords to accept lower rents – but not surprisingly several refused, presumably on the grounds that it might open the floodgates for every other struggling retailer on the high street (and there are plenty of them around). Now Deloitte will be touting it around to the highest bidder, which is potentially rotten news for the group’s thousands of staff.
Coming on the same day that high street bellwether John Lewis reported a 17% drop in weekly sales, blaming it on the snowy weather, it's another reminder of just how tough life is on the high street. The recession-driven shake-out continues...
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