Don’t let Poundland owner maximise its return at our expense, suppliers say

British companies that supply US-owned budget retailer face millions of pounds’ worth of losses if it collapses

Suppliers facing millions of pounds in losses if Poundland collapses have said the chain’s US owner should not be permitted to maximise its return at their expense, as ministers attempt to intervene in the situation.

The fate of the retail chain, its 12,000 staff and about 2,000 suppliers remains uncertain after it filed a notice of intention to appoint administrators at the high court last Thursday.

The US restructuring specialist Gordon Brothers, which bought the now 600-store Poundland chain for £1 last summer, remains in talks with at least two possible buyers for the company. They include Northern Ireland’s Martin Property Group, whose offer has been backed by the retailer’s management team.

Gordon Brothers executives are understood to be meeting Jonathan Reynolds, the business secretary, on Wednesday while Poundland’s management team have a separate meeting with Kate Dearden, the minister for the future of work, and the shop workers’ union Usdaw amid political pressure to find a rescue deal.

However, Gordon Brothers is understood to prefer the option to break up Poundland, sell off its stock and parcel up stores for sale to other retailers, including Tesco and the owner of Poundstretcher, because this would pay off more of a £30m shareholder loan.

This route could save some retail jobs but would leave suppliers with unpaid debts and millions of pounds’ worth of stock without a retailer to sell it to.

Karan Shah, a director of Universal Toiletries, a fragrance and toiletries supplier to Poundland, told the Guardian the company faced a financial risk of about £1.5m, including almost £700,000 in stock already delivered but yet to be paid for, and the rest in undelivered stock and components.

“Gordon Brothers should not be permitted to maximise its own financial return at the expense of suppliers without exploring all the alternatives of a solvent deal,” he said.

Shah suggested the timing of the potential administration appeared “very advantageous” to Gordon Brothers, “at the busiest time of year when the warehouses are full of stock”. This could leave millions of pounds’ worth of stock that could be sold off by any administrator to pay back the loans held by Gordon Brothers if Poundland is broken up.

Shah’s company worked with the chain for about a decade but stopped supplying stock in recent weeks amid concerns about payment. “We are unfortunately significantly exposed,” he said, adding that Poundland was its biggest UK client and “we are a family business, not a multinational that can afford to take a hit”.

Andrew Kay, the chief operating officer of the Oldham-based toy ball supplier John Leisure, said he would have to “rehome” more than a million products, many of which had already been manufactured and were in transit for next spring.

He said doing so would be difficult because many items had been made specifically for Poundland, and other retailers would not want the same sizes and quantities. “It is going to be a nightmare that will hurt me badly to deal with all that inventory,” he said.