McPherson & Ruia hold sway over offer for Life & Style

THE administrators of Altrincham-based retail chain Life & Style have accepted an offer for the business and assets of the company but need to gain approval for the deal from debenture holders Bank of Baroda and former owners Elaine McPherson and Suresh Ruia.

A newly-filed document from administrators RSM Tenon states that 175 parties registered interest in submitting an offer for the company. Bids ranged from firms only interested in buying its stock to those looking to take the business on again as a going concern.

“At present, an offer has been received by the administrators which has been accepted subject to contract and consent from the debenture holders.

“Contract negotiations are at an advanced stage and it is hoped that consent from all debenture holders will be forthcoming,” the report said.

McPherson paid £1.5m for the company to the administrators of the former Ethel Austin business in March last year and secured backing reported to be worth £10m from Suresh Ruia of Manchester-based textiles importer Beamfuture. Following the deal, she owned 51% of the company, Ruia and his family owned 39% and Pan World Brands founder Mike Basso owned 10%.

McPherson subsequently rebranded it as Life & Style while closing its Knowsley headoffice and relocating the company to Altrincham.

Following the acquisition, McPherson was granted a debenture secured over the fixed and floating assets of the company in return for funds loaned to it.

“It is understood that the liability to Elaine McPherson is presently worth approximately £600k but this has yet to be confirmed,” the report states.

Ruia and his family pumped almost £6.5m in working capital and letters of credit, for which it was also granted a debenture last May. Indian-owned Bank of Baroda subsequently provided a working capital facility in August 2010 estimated to be worth around £4.4m, for which it was awarded the highest-ranking debenture.

Management accounts obtained by the administrator show that in the first 10 months to January 2011 the company lost £2.5m on sales of £37.1m.

However, the company’s financial position significantly worsened over the next three months as it took on more stores and like-for-like sales dwindled, leading to a three-month loss of £3.4m on sales of just £9m.

In May, the company filed a Notice of Intention to Appoint Administrators as McPherson sought further funds to keep the business going, but Bank of Baroda eventually appointed RSM Tenon as administrators in June.

At the time of RSM Tenon’s appointment, the company employed 1,008 staff and had 108 stores. Administrators have subsequently closed 34 stores and laid off 440 staff.

Former directors have yet to file a statement of affairs detailing Life & Style’s assets and liabilities, but administrators have expressed their belief there will not be enough in the pot left to repay Bank of Baroda, which means that unsecured creditors owed millions are unlikely to receive any money.

In April this year, McPherson created a company called Life & Style Retail (No. 2) with a view to launching a bid to buy back the business and assets of the company for the third time in as many years.

Shop workers’ union USDAW has written to the government expressing its concerns about this and has asked administrators to ensure the prospective buyer has “an ability to run the business effectively and show they can provide a long term, sustainable future for its employees”.

RSM Tenon has also billed fees worth over £468,000 since its appointment in June, which are subject to approval by the company’s creditors. A spokesman for RSM Tenon said that the firm “cannot comment on the details of an ongoing administration”.