Poundland unable to buy new stock as fears over collapse grow

Poundland has been blocked by its American owner Gordon Brothers from accessing cash in its bank accounts, leaving the discount chain unable to purchase new stock and its 600 shops "running on fumes," according to the BBC. About £50m has been frozen, and the company has filed a notice of intention to appoint administrators, which protects it from creditors until Thursday. Gordon Brothers, which bought Poundland for £1 last June, rejected a takeover bid that could have saved thousands of jobs, and its executives will appear before the Business Select Committee on Wednesday to face questions about whether they are genuinely pursuing a solvent rescue.

The two sides paint sharply different pictures of the business. Poundland boss Barry Williams told staff last week that like-for-like sales were up 11.4%, the business made a profit of £18.1m in the year to September, and he called it a "strong recovery" from the previous year's £68m loss. Gordon Brothers, by contrast, said the chain remains "challenged and vulnerable to any potential downturn in future trading" and noted it had provided significant funding since acquiring the business, while also making £18m from debt interest payments and other fees and charges.

A source familiar with the sales process said London-based Xyra Group is making "significant progress" in its last-minute bid and could now be the front runner, making an extension of Thursday's deadline increasingly likely. However, such an extension would be difficult to justify if Gordon Brothers continues to block funding. One observer remarked, "if Gordon Brothers is going in front of that committee, you don't want to be giving the message we're pulling up the drawbridge."

If no deal is reached, Poundland could collapse into administration and be broken up. There has been interest from Poundstretcher, Tesco and B&M in picking up individual stores, which could mean continuing employment for many workers. The central issue is whether a piecemeal sale would protect more jobs than a buyer willing to keep Poundland trading as a national chain, with suppliers preferring the latter outcome.