Administrators are
going in at BHS, the British chain of down-at-heel department stores, best known through the years for its budget lighting department and serving up cheap coffee to pensioners.
The business has been managed for most of the past 16 years by Sir Philip Green, “King of the Shops,” on behalf of his wife Tina, who has spent the period in Monaco, avoiding UK tax. BHS was sold last year to an opaque group of supposed turnaround specialists. But the situation was probably already terminal – hence the sale price of £1.
Here, in very rough terms, is how the finances worked. It’s an open question as to whether, with a little less financial engineering, this business might yet have survived.
Green, a short man with a famous temper, acquired BHS (on behalf of his wife) for a pittance back in 2000. The store chain was in dire shape, but was conceivably worth more than he had paid. So Green booked circa £100m of ‘negative’ goodwill through the P&L, declaring BHS to be surprisingly profitable. Magic.
The parent company was then loaded with debt and the bulk of the cash was sent, via dividends, to Tina in Monaco. Precious little went into BHS, which continued to struggle.
Green had learnt the trick here earlier in the 1990s, working alongside the Barclay Brothers, who had used a similar mechanism to (legally) siphon many millions out of the Sears shoe shop chain before it sank without trace.
The dowdy BHS didn’t really matter too much to Green, since his friends at HBOS (RIP) had lent him enough to buy a solid retailing business with real prospects in the shape of Arcadia/Top Shop. Green was able to party hard with the likes of Kate Moss or spend time on one of his super-yachts.
Now, it can be argued that this is simply efficient capitalism in practice. BHS has been in a vegetative state for 20 years: leveraging up the near-corpse allowed the Greens to pump money into other job-creating things such as the crafting of a solid gold Monopoly set, featuring Tina’s high street acquisitions.
As they prepare for the dole-queue, those 11,000 workers will know that and are bound to understand.
