The Body Shop’s collapse was triggered by owner Aurelius failing to refinance loan, which resulted in an unplanned funding gap upwards of £100m, The Telegraph has reported.
The Body Shop’s fall into administration was triggered when HSBC withdrew a line of credit and the retailer’s private equity owner failed to secure new funding.
HSBC is reported to be a lender to the beauty chain, through its former parent company Natura, and the bank decided to review its relationship with The Body Shop after it was sold to Aurelius in November, giving the retailer at least 18 months’ notice of its decision to stop lending.
HSBC’s decision meant any potential buyer needed to refinance existing loans or secure new lines of credit to keep The Body Shop afloat.
Aurelius failed to secure new funding and a source close to the firm denied being made aware of HSBC’s decision to stop funding The Body Shop.
A report released by The Body Shop’s administrators FRP Advisory said: “The short-term cash position of the company was adverse to that that had been forecast, driven by poor results in the 2023 financial year and the unwinding of the company’s working capital.”
Outlining the events that led to the retailer’s decline, the report said The Body Shop’s bankers intended to “cease providing banking facilities” while “simultaneously seeking cash backing in respect of guarantees provided by the company (approximately £8.9m) and ceasing the cash pooling arrangements enjoyed by the group resulting in nearly £6m of blocked cash”.
The report adds that this “ultimately resulted in a substantial unplanned cash outflow from the business” with a “forecast peak funding requirement for the company in excess of £100m”, which was “significantly greater than the requirement identified as part of the acquisition process”, which suggested a peak requirement of £63m in financial year 2024.
The beauty chain, which fell into administration in February less than three months after being acquired by private equity firm Aurelius, has since closed nearly half its 197 stores and made more than 750 staff redundant across its head office, distribution centre and store estate in the UK.
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