HHGL trading as Homebase - Case Update

The joint administrators of Homebase have filed their proposals setting out what led to the home improvement retail giant’s collapse, as well as the pre-pack deal reached with CDS (Superstores International) trading as The Range and Wilko.

HHGL was incorporated in 1954 and was the principal trading entity within the Homebase Group, which operate under the Homebase and Bathstore brands. Prior to the administration, HHGL held 135 property leases and had 3,446 employees, including 374 at the head office.

The business ran into difficulties well before the pandemic. It was sold by Home Retail Group to Wesfarmers in 2016, who then sold it to Hilco Group for £1 in 2018 after suffering significant losses. The company then entered a CVA in August 2018, which was successfully concluded in June 2020, resulting in a reduction of its store count.

The Group traded profitably during 2020 and 2021, benefitting from consumer demand for DIY products during the Covid-19 pandemic. However, things took a turn in 2022 and continued to be difficult in 2023, with losses totalling nearly £60 million. These losses were caused by a number of factors, including a decline in consumer confidence and spending, high cost inflation, high interest rates, expensive freight costs, shipping delays and poor weather.

In May 2024, the Group’s financial forecast showed a funding requirement of approximately £10 million from September 2024, rising to approximately £20 million in December 2024. The Group commenced discussions with funders Wells Fargo Capital Finance (UK) and Ark Finco UK to mitigate and/or fund the shortfall.

In July 2024, the Group commenced a leasehold marketing process, which resulted in a sale of 11 leasehold interests to J Sainsburys in September 2024 for £31 million, 30% of which was used to pay down the Wells Fargo loan and alleviated the funding forecast in September 2024.

An M&A process was launched in 2024 due to limited interest from lenders and based on ongoing discussions with Wells Fargo and Ark Finco. A number of offers were received for small numbers of leasehold property interests, one solvent offer was received which was not considered a viable option, and one offer was received from CDS for a significant portion of the business and assets of the Group. Following discussions with Wells Fargo and Ark Finco, the Group concluded that it would not be possible to secure a collective agreement to resolve the impending maturity of the Wells Fargo loan and the forecast funding requirement. As a result, the board concluded that the company should be placed into administration and Gavin Park and Adele MacLeod of Teneo were appointed joint administrators on 13 November.

Immediately on the appointment of the joint administrators, the business name, intellectual property and up to 70 stores were sold to CDS for approximately £25.6 million cash consideration. Approximately 1,150 employees are expected to transfer to CDS.

65 stores are not subject to the transaction and are continuing to trade in the short-term while the administrators continue to explore options.

The administrators’ report can be accessed HERE.