BHS disintegration in a nutshell

How Philip Green's family made millions as value of BHS plummeted

When Sir Philip Green bought BHS in May 2000, he insisted it would not be rocket science to revive the ailing high street retailer. After paying £200m, he was convinced he had the skills to secure its future and make it the foundation of a sprawling retail empire.

But last year, after failing in his mission, Green sold BHS for £1 to a little known group of investors who have steered it into collapse in just over 12 months. His dreams for the chain may have come to nothing, but Green’s family have still been big winners from BHS, taking out more than £580m in dividends, rental payments and interest on loans to help fund a lavish lifestyle.

As the pensions regulator considers whether to pursue Green for between £200m and £300m – to help fill the black hole in BHS’s pension schemes that had developed since 2000 – he is awaiting delivery of his latest toy: a $150m (£100m) superyacht named Lionheart. The 90-metre vessel will join Green’s two other yachts, speedboat, helicopter and Gulfstream jet, which comes in handy for his weekly trips to and from Monaco to visit his family.

Green and his wife Tina were listed as the UK’s 29th richest family in last weekend’s Sunday Times rich list, which estimated their worth as £3.22bn. That total excludes the £280m which researchers suggested Greens might have to hand over to the pensions regulator.

Tina, who since 2004 has been the legal owner of BHS – and the Arcadia Group, which includes Topshop, Miss Selfridge and Dorothy Perkins – is based in Monaco. The handover of BHS to Green’s wife was completed just before the family paid themselves £1.2bn in dividends from Arcadia in 2005, the biggest pay cheque in British corporate history, equivalent to four times the group’s then profits.

Since May 2000, the Green family and other
shareholders have taken £586m out of BHS



Even after the financial crisis hit the UK economy in 2008, the Greens have partied on. The family enjoy several weeks a year at the exclusive Barbados resort Sandy Lane, where they can hang out with friends such as Simon Cowell.

In 2012, the family apparently shelled out more than £3m to fly 150 guests – including Cowell, Kate Moss, Holly Valance, and her partner, the property developer Nick Candy – to Mexico’s Yucatan peninsula for Green’s 60th birthday party. Rihanna and Stevie Wonder were reportedly flown in to provide the entertainment.

But that was a relatively muted affair compared to Green’s 50th birthday bash, for which he chartered a private jet to fly 200 guests, including journalists and other business associates, to Cyprus for a three-day toga party at a cost of £50m.


     
   
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Philip Green with Suki Waterhouse, Kate Moss, Cara Delevingne, Sienna Miller and Naomi Campbell. Photograph: Richard Young/Rex  
Last year’s birthday was rather different. Days before Green turned 63 he sold BHS, after years of trying to offload the weighty burden of the group’s pension fund liabilities and trading losses. “I think my birthday present was a disposal as opposed to a purchase,” he told the Sunday Times.

Green helped smooth through the deal by agreeing for Arcadia to pay £5m a year into BHS’s pension fund over three years, alongside a matching £5m payment from the group’s new owner, Retail Acquisitions.

Arcadia also wrote off £200m of charges for BHS assets as part of the takeover deal. Arcadia initially retained a further £40m of intercompany debt, but that was also written off in February. It also left £65m of cash in BHS as well as about £100m of freehold and long leaseholds. On the eve of the deal, one of BHS’s two head offices, next door to each other on the Marylebone Road, was sold for between £30m-£40m. Though the Greens had a stake in the building, they agreed that the proceeds go to BHS.

Pension warning

However, the pensions regulator looks likely to seek more from the Greens, as a Guardian analysis suggests the family earned more from BHS during their ownership than the retailer’s £571m pension deficit, as measured on a buyout valuation.

When Green bought BHS in May 2000, the group’s fund was in surplus. In the year to March 2001, accounts filed at Companies House indicate a surplus of at least £5m. A year later that had risen to £17.4m on a pre-tax basis. But when pension trustees wrote to members in December last year, they warned that the company’s two funds had a combined deficit of £225.6m, based on the difference between its assets and potential liabilities.

2002
£17m
surplus
DEFICIT
SURPLUS
25 April 2016
The pension deficit is potentially £571m on the basis that the company is facing insolvency. Green is understood to have offered £40m in cash to help support the fund – which has 20,000 members
2008
The financial crash sees the surplus shrink to £3.4m
2015
After Green sells BHS to a group of City investors for £1, pension trustees write to members, warning that the company’s two funds had a combined deficit of £225.6m
2009
The fund records a deficit of £137.9m. BHS agree to inject additional contributions of £2.5m, rising to £7.3m in 2012, as part of a 23-year recovery plan for the deficit
March 2001
Accounts for BHS Group filed at Companies House indicate a surplus of at least £5m
May 2000
Philip Green
buys BHS
Guardian graphic
Over the past 16 years, the BHS pension fund has
fallen from a £5m surplus into a £571m deficit

Between 2002 and 2004, shareholders extracted just over £422m in dividends – the vast majority of which went to Green’s family. A company controlled by Green also earned nearly £10m in interest from a £19.5m subordinated bond, a form of loan, issued to BHS in May 2000.

The Green family also collected £151.4m in rent from 12 stores owned by a Jersey-based entity it controlled called Carmen Properties. The stores were bought for £106m in 2001 and sold for £70m last year as part of the deal under which the business passed to Retail Acquisitions.

     
   
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Green’s latest £100m yacht Lionheart, moored in Livorno. Photograph: livornodailyphoto.blogspot.co.uk  
The billionaire has pointed out that the deal marked a near-£40m paper loss – though this was more than offset by rental income, which property experts have said was at the top end of the market rate for such stores.
Meanwhile, another entity under the Green family’s control, Mildenhall, collected nearly £3m from ground rent on one of BHS’s head offices over seven years.

Even today, the family is understood to maintain ownership of BHS’s Marylebone headquarters, worth about £40m. If no buyer is found for the wounded retailer, the Greens could stand to benefit from the arrival of new, wealthier tenants in the sought-after central London location.

http://www.theguardian.com/business/2016/apr/25/bhs-philip-green-family-millions-administration-arcadia

Syl wrote:He is a corrupt areshole....as are many fat cats who pillage and  plunder off the hard working underpaid masses.

I avoided BHS for years because they didn't seem to keep up with fashion, lately I have popped in and bought shoes and a few tops....though their lighting dept was always good.
I hope they manage to survive this.

Stormee wrote:

Syl wrote:He is a corrupt areshole....as are many fat cats who pillage and  plunder off the hard working underpaid masses.

I avoided BHS for years because they didn't seem to keep up with fashion, lately I have popped in and bought shoes and a few tops....though their lighting dept was always good.
I hope they manage to survive this.

Few months ago we bought a light from there.

Not many of my family go in BHS much and quote OLD FASHIONED.

Our older laydiz  not with us now used them regular.  

Original Quill wrote:What does BHS mean?  I googled it, and got: Be Home Soon...

I'm thinking, nah.

Raggamuffin wrote:

Original Quill wrote:What does BHS mean?  I googled it, and got: Be Home Soon...

I'm thinking, nah.

British Home Stores.

I hope you read that properly.

eddie wrote:Whoosh!