Recent reports across the national press that a Christmas sales slump could push Paperchase to a possible CVA and store closures was met industry-wide with shock and dismay.
On a more positive note, Sky News reported on Thursday 24 January that Paperchase’s owner since 2011, Primary Capital, held talks with potential bidders on Thursday in London. Advisors KPMG discussed the principle of CVAs (Company Voluntary Agreement) with several Paperchase landlords. The British Property Federation, which represents commercial landlords, is said to have attended the talks on Thursday.
The interest of bidders is an endorsement of the retailer’s continuing strong brand identity. It joins a relatively exclusive club of UK-based high street retailers - French Connection, HMV and sofa.com - that are currently up for sale.
Sky News sources learned that any sale would include investigating a pre-pack administration, an insolvency process which involves shedding liabilities before a company is acquired by new owners. Store closures will, therefore, be an inevitable part of any possible sale agreement. Loss-making stores are likely to be the first to go, though how many of the brand’s 145 UK branches and 75 concessions in the UK, Europe and North America are at risk is currently unknown.
Paperchase seems positive about its prospects according to an insider source at Sky News, who said that if there was insufficient interest in a CVA, Paperchase would press ahead with a search for new backers. The Sky News insider added: “Essentially they’re trying to reverse-engineer the CVA process by gauging landlords’ appetite for it before putting a formal proposal to them.”
Paperchase remains profitable - just - making £0.1m in profit before interest and tax in its last financial year, according to Sky’s sources.
Timothy Melgund, deputy chairman of Paperchase, told GiftsandHome on January 21: “This is not an enjoyable time, but there is an inevitability given what is happening in the UK retail scene, with the general drop in footfall. Our ecommerce and internationally based businesses continue to perform strongly but, as many will know, UK retail is severely challenged at present for a whole host of reasons.”