Poundland has been unable to buy new stock for its shelves after its owners blocked it from accessing cash in its bank accounts, as fears grow that the discount chain will collapse.
One insider described the retailer as "running on fumes". It has until Thursday to secure a rescue deal.
It is understood that about £50m has been frozen by its American owner, Gordon Brothers, which means the chain's 600 shops are running out of stock.
Pressure is building on Gordon Brothers, which bought Poundland for £1 last June. The owner rejected a takeover bid that could have saved the thousands of jobs now at risk. Gordon Brothers has been approached for comment.
Poundland has filed a notice of intention to appoint administrators. The move protects it from its creditors until Thursday, when the 10-day moratorium expires. If there is a prospect of a solvent deal, the deadline could be extended. If not, the company is set to collapse into administration and could be broken up.
A source said access to funds was limited because of a tension between Gordon Brothers' dual role as creditor and shareholder, but expected funds to be relaxed in the next two days.
Last week, Poundland boss Barry Williams told staff that like-for-like sales, which exclude new store openings, rose 11.4% in a week that included Halloween. He said the business made a profit of £18.1m in the year to September, a "strong recovery" from a loss of £68m the year before. The latest annual accounts have not yet been audited.
Gordon Brothers has painted a different picture. It said the chain remains "challenged and vulnerable to any potential downturn in future trading", and that it has provided significant funding to support the company since it acquired the business. It said it has made £18m from debt interest payments and other fees and charges.
On Wednesday, Gordon Brothers executives will appear before the Business Select Committee, where MPs are probing whether they are genuinely pursuing a solvent rescue of the business, which has 11,000 employees. The session will be held in private because commercially sensitive discussions with bidders are still under way.
A source familiar with the sales process said London-based Xyra Group was making "significant progress" in a last-minute bid and could now be the front runner. An extension of Thursday's deadline now seems increasingly likely.
Even if the business is sold as a whole, there is no guarantee a new owner would not reduce the number of stores. Poundstretcher, Tesco and B&M have shown interest in taking over stores, which could keep many workers in jobs.
Source: BBC
