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Bankruptcy Fast Approaching for UK Knitwear Specialist

Roughly 24,000 jobs hang in the balance as one of the U.K.’s fashion and home goods giants flirts with bankruptcy.

The outlook for thousands of workers at Philip Day-owned Edinburgh Woollen Mill Group is not looking good after the company filed a notice of intention to appoint administrators with U.K.’s High Court.

Word surfaced last month that possible buyers were checking out Edinburgh’s holdings and that the company had already hired FRP Advisory to evaluate its brands. With the notice of intention filed in a British court, FRP will have about 10 days to conduct a deep dive on a company valuation and determines the next best course of action.

The potential buyers circling around Edinburgh are believed to be strategic companies located outside of the U.K., and there was talk that they were interested in buying different pieces of the company. With the plan to appoint administrators, there’s now a greater chance that the company could be broken up.

Edinburgh owns the value chain Peacocks, as well as the apparel brands Jaeger, Austin Reed and Jacques Vert, among others. British billionaire Day is known for his penchant for buying up distressed high-street retail brands. His ownership of Edinburgh began in 2002 when he led a buyout of the knitwear specialist. Over time, his expanded its holdings to include distressed brands. He acquired Peacocks in 2012, and last year snapped up Bonmarche through a separate holding vehicle. Bonmarche then fell into administration and was acquired by Peacocks.

Like its competitors, Edinburgh faced tough times when nonessential retailers were forced to temporarily close earlier this year to help curb the spread of the coronavirus outbreak. Edinburgh CEO Steve Simpson told media that he blamed “false rumors” regarding unpaid suppliers for making the difficult business climate even harder.

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In May, the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), the country’s largest trading group for garment factory workers, sent a letter to Day seeking to settle 27 million pounds ($33 million) in unpaid bills by May 29 or it would stop producing and delivering goods for the fashion group’s brands. The letter also noted that demands for deep discounts would be financially catastrophic and expose BGMEA members to various claims and liabilities from regulations, banks and other third parties.

The majority of retailers and apparel vendors during the initial Covid-19 outbreak canceled orders, sought deep discounts and withheld payments for completed and shipped goods.

Edinburg Woollen Mills Group has denied BGMEA’s allegations.

“This situation has grown worse in recent weeks as we have had to deal with a series of false rumors about our payments and trading which have impacted our credit insurance,” Simpson told The Independent. “Traditionally, the group has always traded with strong cash reserves and a conservative balance sheet but these stories, the reduction in credit insurance—against the backdrop of the lockdown—and now this second wave of Covid-19 and all the local lockdowns, have made normal trading impossible.”