The management team of BHS has apologised to staff over the collapse of the company, blaming it on the failure of Dominic Chappell’s Retail Acquisitions consortium to raise funds that it had pledged to bring in.
Chappell is scheduled to appear in front of MPs on Wednesday morning to discuss his role in the demise of the 88-year-old department store chain, which has put 11,000 jobs at risk.
Other members of the Retail Acquisitions vehicle will also appear in front of MPs, as well as Darren Topp, the chief executive of BHS.
Chappell’s consortium bought BHS for £1 in March 2015 from Sir Philip Green’s retail business Arcadia. Green had controlled BHS for 15 years, during which time the tycoon and other investors collected more than £580m in dividends, rent and interest payments.
The letter to BHS staff has been signed by nine members of the management team, not including Topp. It sets the scene for the hearings on Wednesday, which are likely to see Chappell face heavy criticism from members of the work and pensions committee and business, innovation and skills committee, who are investigating the collapse of the company.
The letter says: “We, the management team of British Home Stores, would like to apologise to you and all our colleagues for the very sad situation we find the business in.
“The inability of RAL [Retail Acquisitions] to raise sufficient funds and dispose of key property assets, hindered the management team in delivering the turnaround plan.
“Any sums of financing raised or property disposals appeared to fall short of expectations. Under challenge, Dominic Chappell continuously assured us he would deliver on raising funds, this was not the case.”
“RAL ownership did not give confidence to the credit insurers and suppliers that would allow BHS to operate under normal trading terms. To compensate for this, BHS needed additional funds to guarantee supplier orders, this contributed further to major cash flow difficulties.”
The letter adds that Topp’s leadership had been “inspirational” and praised the “true BHS spirit” of the workforce.
Separately, Paul Sutton, who introduced Chappell to the deal, has spoken for the first time since BHS collapsed, saying he is “devastated”. Sutton told the Guardian that BHS was “saveable”. He said: “I am devastated about what has happened. I believe this company was saveable. It is devastating what has happened to 11,000 people’s jobs and their pensions.”
Sutton was forced to walk away from a deal for BHS, passing it on to Chappell instead, after a whistleblower handed a dossier to Green showing he had been convicted of fraud in France.
However, Sutton has provided new evidence showing a judge at a magistrates court in London in 1999 ruled there was no evidence of dishonesty and he should not be extradited to France. Further documents show France ruling in 2008 that the conviction and sentence was “extinct”, allowing Sutton to re-enter the country.
Robin Saunders, the former BHS shareholder and City banker, told MPs on Tuesday that she introduced Sutton to Green in April 2013 after the retail tycoon told her he was looking to sell the business.
“I was under the impression he had capital,” she said. “He is quite charismatic in character and I thought he could do it.”
Saunders told the hearing at the business, innovation and skills committee into the demise of BHS that she had been paid about £800,000 for her beneficial interest in shares in the retailer – a 0.5% stake – when the business was transferred into Green’s Taveta holding company in 2009 as part of a restructuring.
The payment came on top of about £2m in dividends understood to have been received by Saunders from BHS during Green’s ownership of the company. The admission demonstrated the scale of the financial benefit for early shareholders – including Saunders, restaurateur Richard Caring and Scottish entrepreneur Sir Tom Hunter – went beyond dividends that have already been declared.
But Saunders insisted the company had not been asset-stripped. “The company was extremely cash generative in its own right. It was an extremely well run company,” she said.
Joseph Dryer of River Rock, which advised Chappell prior to his takeover of BHS, told the hearing on Tuesday that Chappell had given the impression that he had been led to the BHS deal as he knew the Greens and had attended parties on their yacht.
Chappell had told his advisers that he had agreed a deal with Green that included the settlement of the pension deficit by the billionaire. When it emerged that no such deal had been agreed and the pension was still to be resolved River Rock resigned. Dryer suggested there had been a break down in relations.
“At that point we had been working [with Chappell] over three weeks. Normally when you work with someone you build confidence levels with them. But that wasn’t exactly the case,” Dryer said
