McColl’s Retail Group is now quite likely to enter administration very soon after failing to secure fresh financing.  The convenience stores chain, which owns 1,100 managed shops and employs 16,000 people has been in dead-locked rescue talks with its banks and Morrisons, its wholesale supplier. McColls also has a partnership with 200 Morrison Daily stores.

McColls said – “while no decision has yet been made, McColl’s confirms that unless an alternative solution can be agreed in the short term, it is increasingly likely that the group would be placed into administration with the objective of achieving a sale of the group to a third-party purchaser and securing the interests of creditors and employees.” 

Statements like these are never encouraging. The company is aiming at refinancing to resolve immediate funding issues and to secure enough cash to continue operating in the longer term.

Either way – the company said that any refinancing plan that might be agreed would likely wipe out ordinary shareholders. The company warned that its shares were likely to be suspended next month as it was unable to meet a deadline to file its financial results.

Morrisons previously has told investors that it would face a hit of up to £130 million from the collapse of McColl’s.  The supermarket chain, now owned by Clayton Dubilier & Rice, the private equity firm, had said that it was continuing to provide supplies to McColl’s. However, it also said it was already owed £10 million from its wholesale contract.