The taxpayer faces a bill of up to £36m for the controversial collapse of the BHS department store chain.
The administrator’s report for BHS Limited, which has been seen by the Guardian, reveals the company owes £15.4m in VAT, £963,000 in corporation tax and £20m in “residual employee claims”. The employee claims include redundancy costs that will have to be picked up by the government’s Redundancy Payments Service.
Duff & Phelps, the administrator, said it expected to make some form of payment to unsecured creditors of BHS, but warned this would depend on the money raised from the sale of company assets and could be as little as 3p in the pound. The company collapsed owing more than £1.1bn. This includes a £571m pension deficit, £358m to landlords and £48.5m to suppliers.
The secured creditors are led by Sir Philip Green’s retail business Arcadia, which is owed £35m. Arcadia is likely to be repaid in full, Duff & Phelps said. This will provoke further anger towards Green over his handling of BHS, which he sold to three-time bankrupt Dominic Chappell last year. Green and other investors collected more than £580m in dividends, rent and interest payments during his tenure at BHS.
A group of Conservative MPs are preparing to call on the honours committee to strip Green of his knighthood if the billionaire refuses to pump hundreds of millions into BHS’s pension fund in order to fill a £571m deficit. According to the Press Association, a group of backbench MPs will write to the honours forfeiture committee ahead of Green’s appearance in front of a parliamentary committee next week.
The committee will analyse the request and can advise the Queen to withdraw the honour if a criminal offence has been committed, a person has been struck off a regulatory body or in exceptional circumstances. A spokesperson for the prime minister said: “There is a clear process for looking at cases where people already have honours and those are called into question.
“If anyone wants to make a case, they need to make an application to the honours forfeiture committee who would then consider it. It’s not government, it’s a separate committee.”
The parliamentary investigation into the collapse of BHS will question Green on Wednesday. The Topshop boss controlled BHS for 15 years until he sold it for £1 to Chappell’s consortium Retail Acquisitions in March 2015.
MPs have called a host of new witnesses to give evidence, at a date to be determined, as their investigation into BHS widens. These include property mogul Alexander Dellal, who helped to finance Retail Acquisitions, and Paul Sutton, a businessman who introduced Chappell to Green. Mike Ashley will provide written evidence about a bid to rescue BHS by Sports Direct.
The MPs have also called a collection of figures from Green’s inner circle including Richard Caring, the restaurateur who used to own shares in BHS, Brett Palos, Green’s stepson, and Neville Kahn of Deloitte, a long-time adviser to the tycoon. There are also recalls for Arcadia executives, including finance director Paul Budge and chairman Lord Grabiner, and Anthony Gutman of Goldman Sachs, who will be joined by two senior colleagues.
The witnesses have been called after senior management at BHS and Chappell, the former owner, made explosive allegations to the work and pensions committee and the business, innovation and skills committee on Wednesday.
The chief executive of BHS, Darren Topp, accused Chappell of having his “fingers in the till” and threatening to kill him. Chappell claimed Green had pushed BHS into administration after going “insane” when he found out Ashley’s Sports Direct was in talks about buying it.
Duff & Phelps also confirmed in the administrator’s report for BHS Limited, the main trading company, that it had uncovered a number of financial transactions within BHS that require further investigation. “During our preliminary investigations there are a number of transactions that on the face of it may require investigation. Additional information is required to understand the true nature of the transactions. The joint administrators will keep the creditors informed of any significant development,” the administrator’s report said.
The Insolvency Service and the Pensions Regulator is also investigating the collapse of BHS, while the Serious Fraud Office is considering launching a probe. Duff & Phelps said it had concentrated on securing company records, calling in mobile phones and laptops, meeting directors and senior management, and analysing financial information.
BHS is being wound down, with its 163 shops closed, after Duff & Phelps failed to secure a rescue deal for the retailer. The administrator’s report confirmed that a potential deal broke down after the would-be buyer, thought to be a Portuguese-backed consortium, failed to prove it had the funds to buy BHS.
Duff & Phelps said there were five bids to buy BHS, but four of the parties withdrew. This left “bidder 4”, who had offered £30m to save the retailer. “Bidder 4 was provided with a final opportunity to provide proof of funding but this deadline passed and as such, in the absence of any other viable going concern offers, the joint administrators had no alternative but to announce the managed wind down of the business,” the administrator said.
Duff & Phelps also contradicted Chappell’s claim that administrators were called into BHS after Green blocked a rescue deal with Ashley. It said BHS sought legal advice about its future options on 15 April – 10 days before the appointment of administrators – after the sale of its London Oxford Street store and a proposed loan with Gordon Brothers, the restructuring firm, raised less funds than it expected.
The BHS board then met the board of Arcadia, including Green, on 18 April, when it warned “it had insufficient funds to continue to trade in the short to medium term and that an insolvency process was likely”. Arcadia, a key creditor, agreed and contacted Duff & Phelps to ask they meet BHS executives on 19 April. At a BHS board meeting on 21 April the board then resolved to put the company into administration the following day.
According to Duff & Phelps, the board of Retail Acquisitions was then approached by an unconnected UK retailer – Sports Direct – with “a view to rescuing the BHS Group”. These negotiations “failed” on the evening of 24 April, and Duff & Phelps was appointed as administrator on 25 April.
