The Jessops camera chain has handed control of the business to its bank in a take-it-or-leave-it deal it said would save the business and 2,000 high street jobs.
The 72-year-old chain, the largest photographic retailer in the UK, has agreed to a debt-for-equity swap with HSBC. Shareholders, whose investment in Jessops was worth 155p a share just five years ago, will get just 1p for every 10 shares they own.
A good result
Chairman David Adams, who was brought in two years ago to try and save the ailing business, said the deal was “a good result”. The alternative, he said, was immediate insolvency and shutdown.
Jessops is one of a number of firms that have been forced to relinquish their equity to lenders to slash their debts and stay in business.
Adams said Jessops‘ dire financial situation was not the result of the recession but of over-ambitious debt-fuelled growth plans which left the retailer owing HSBC some £60m. The retailer, he said, had pursued a “growth at any cost” business plan that was unrealistic.
Fierce competition
Jessops was hit by fierce competition for point-and-shoot compact cameras and increasing use of camera phones. Sales collapsed, the group issued multiple profit warnings and the directors were replaced. One hundred stores were closed, 500 jobs axed and old stock sold off at a loss.
Adams said the swap deal showed “we have demonstrated to the bank that Jessops has a valid place in the market and a valid business plan and that there is good chance of getting a return”.
From The Guardian
