Poundworld is in crisis talks to secure emergency private equity funding as the discount retailer’s advisers draw up plans for its collapse should discussions break down.
Sources said Poundworld was gearing up to announce investment from a new shareholder next week, alongside a restructuring plan.
The retailer’s private equity owner TPG and lender Santander have been fielding bids for the firm.
It is understood the board has rejected multiple attempts to buy the business through a pre-pack administration.
Poundworld employs 5,700 people across 355 stores and is likely to push ahead with a sweeping store closure programmes through a Company Voluntary Agreement (CVA) even if it brings on new investment.
Under a previously mooted restructuring plan, the discount chain was looking at shutting 100 of its 355 stores.
Private equity firms Endless and Alteri have been linked with bids for Poundworld.
However, the retailer’s advisers at Deloitte are understood to be simultaneously preparing contingency plans for an administration should talks collapse.
In an internal memo to staff sent today, Poundworld executive chairman Steve Johnson said: “Whilst there is no confirmed outcome at this point, please be aware that the discussions are progressing in a positive way and as a result we anticipate being able to confirm a positive update next week.”
A CVA is a form of insolvency that allows retailers to slash rents and shut stores if approved by landlords.
However, retailers have been announcing new investment alongside a CVA to ensure they can continue trading.
Poundworld’s losses widened in 2016/17 to £17.1 million, up from £5.4m of losses the year before.
The retailer was hit with a £5.7m charge for onerous leases, a provision retailers make when the cost of a lease is no longer covered by the income of the store.
Several high street names have shown significant financial distress this year, with Carpetright, Mothercare and New Look all undertaking CVAs.
Restaurant groups including Carluccio’s, Prezzo and Byron have also been shutting dozens of stores as they are squeezed by rising costs and a fall in consumer spending.