Straightforward Retailer Tangled Up in Complex Debts

Article excerpt

Byline: David James

It is a story that will sound familiar to fans of Manchester United. A seemingly successful operation is burdened with a debt pile growing rapidly at punitive interest rates, and owed to mysterious New York hedge funds.

Infuriatingly for everyone who cares about the business, much of the debt was taken on to fund the current owner's takeover and now may be threatening the hopes of everyone involved.

Except this is not the story of an American sports entrepreneur engaging in a high-risk takeover in the tightrope world of top flight football club management.

This is the story of a straightforward, low-cost high street retailer selling "knickers to fat ladies", in the words of its boss when he took over the company. This is the story of Peacocks.

The accounts of the Cardiffbased firm suggest that to present the chain's collapse into administration yesterday as that of just another retailer brought low by the economic slump - or even as one failed by its high street banker backers - would be to miss a key part of the story.

Peacocks has been burdened with a loan of pounds 149m that was taken out at a massive 17.18% interest rate when chief executive Richard Kirk led a management buyout in 2005.

It has been reported that the money is owed to two hedge funds, Och-Ziff and Perry Capital, the same New York hedge funds that bankrolled the bid by the US-based Glazer family for Manchester United.

Yet the details are difficult to confirm, partly because a holding company called "Hanson Number 2a", registered in the Cayman Islands, holds the Peacock Group's debt.

At the time of the takeover, the pounds 149m was a relatively small and manageable part of the business's total pounds 450m debt.

And had Mr Kirk been able to turn round the business and sell it in two or three years at a healthy profit, he would almost certainly have been able to pay off the loan and make a profit. …