The lenders to Peacocks have appointed KPMG to carry out an independent review of the business amid concerns that it might breach its bank covenants. Surely it is no coincidence that this has been done a week before the September quarter day when its rents will be due. However, rent is not its main concern as the company has reported borrowings of £647m! and it made losses last year to April of £56.7m. Most of this was as a result of finance charges.
Peacocks has been feeling the downturn on the high street and has found it difficult to pass on any increases in costs in cotton. What is more there has been aggressive discounting from traditionally more expensive outlets that is squeezing the mid-market.
Obviously the lenders can appoint administrators if they feel that it is the best way to protect their secured debt. If a CVA was proposed then the secured debt would not be compromised but it would mean that the unsecured debtors would receive a dividend on their debt but Peacocks would be able to shed loss making stores for the good of the group.