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Speculation is mounting that Blacks Leisure is set to go into administration, following suggestions that it could opt for a so-called pre-pack deal.
The group, which is listed on the London Stock Exchange, indicated that it may choose such a deal since it is unlikely that an offer will be made for its shares. Pre-pack agreements ensure that firms are sold immediately after they have gone into administration.
Despite its concerns over a share sale, the outdoor clothing group does hope to see an offer made for its trade, assets and brands, which include 98 Blacks outlets and 208 Millets stores, along with the Peter Storm and Eurohike brands.
Edinburgh Woollen Mill and Mountain Warehouse are among the parties who are said to be interested in acquiring some of the group’s interests. It is hoped that by next month, the future of Blacks will be decided.
After failing to gain access to additional funding to secure its future, Blacks was forced to put itself up for sale. The group, which has made heavy losses in recent times, currently employs 3,600 workers in its stores and at its head office and distribution centre.
It is £36 million in debt, and recently confirmed that it made a loss of £16 million in the opening six months of the year. The organisation has also warned that a worse full-year performance than originally anticipated is likely to be reported. The unseasonally warm weather of the autumn took its toll on sales of cold weather clothing in the group’s stores.
Since the beginning of 2011, Blacks shares have fallen by around 97 per cent. The latest update concerning the status of the firm led to a reduction of 40 per cent in its shares. The market value of the group has now dropped to less than £1 million.
Despite Blacks’ plans to opt for a pre-pack administration, these deals have been a cause of controversy in other cases. They do not give creditors the chance to raise objections to a proposed asset sale by voting against it.
Sports Direct is one company which has already decided against a buyout of Blacks. Although the sports company is the group’s largest shareholder, it walked away from takeover talks.
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