As rumors swirl over a potential bankruptcy filing as soon as this week, Arcadia Group is said to have piqued the interest of Frasers Group — the retail conglomerate owned by billionaire businessman Mike Ashley.
Multiple media reports out of the United Kingdom have suggested that Frasers — operator of the Sports Direct, Flannels and Jack Wills brands — offered an emergency loan of up to 50 million pounds (or just under $67 million at current exchange) to the Topshop parent, which had been reportedly seeking funding of 30 million pounds.
“We understand that you believe that this is sufficient to allow the group to overcome its current short-term cash flow difficulties,” read an extract of Ashley’s letter, addressed to Arcadia chairman Philip Green and the company’s top leaders.
Should Arcadia file for administration, which is often compared to bankruptcy in the United States, Frasers indicated that it would participate in a possible sale process and consider an acquisition of the company. Roughly 13,000 jobs at the beleaguered fashion business are at risk.
Watch on FN
FN has reached out to both Frasers and Arcadia for comment.
On Friday, publications across the U.K. reported that Arcadia could collapse “within days” if it was unable to secure the 30 million pounds in funding. The group — also parent to the Topman, Burton and Dorothy Perkins labels — was said to be ready to call in administrators from Deloitte as early as this week.
That same day, Arcadia described the reports as “speculation.” However, it shared that the “forced closure of our stores for sustained periods as a result of the COVID-19 pandemic has had a material impact on trading across our businesses.” It added that it has been working on “a number of contingency options to secure the future of the group’s brands.”
Last year, Arcadia began the insolvency process in its home base of the U.K. It narrowly avoided bankruptcy after receiving creditors’ approval to take dramatic cost-cutting measures in its quest for renewed profitability.
However, the Topshop owner’s struggles have been compounded by the coronavirus outbreak: In late March, as the COVID-19 health crisis took hold around the world, Arcadia furloughed all store employees and the “majority” of head office employees. Members of its board of directors and senior leadership team also took pay cuts ranging from 25% to 50%, while CEO Ian Grabiner temporarily forfeited his salary and benefits.