Ernst & Young has confirmed that beds retailer Dreams has been sold to Sun Capital Partners in a pre-pack administration.
It is thought around 400 jobs could still be at risk, despite Sun Capital purchasing the majority of the company’s assets including more than 170 stores. The price of the transaction has not been disclosed.
Alan Hudson, Craig Lewis and Joe O’Connor of Ernst & Young have been appointed as the joint administrators of Dreams Plc.
Dreams is the UK’s largest specialist retailer of beds and associated products with 266 stores across the UK, employing approximately 2,000 employees.
As a result the business has secured new investment and will continue to operate as a going concern outside of insolvency. The new owner will honour customer orders where part payment deposits have been made for goods and customer warranties.
Alan Hudson, joint administrator, said: “High street retailers have faced unprecedented conditions over recent years, and the market for higher value discretionary purchases has been particularly tough.
“Dreams is a well known market leader, but in common with many others has suffered as a result of this depressed retail environment, a rapid expansion of its store portfolio and onerous lease liabilities.
“Whilst recent performance has improved, it has seen a decline in like for like sales across its store portfolio as well as its operating margins being squeezed. This has resulted in the business being unable to continue to operate outside of Administration.”
“However, we are pleased to announce that a sale has been completed that sees the majority of the Dreams business including 171 of its stores, its head office and its two UK manufacturing facilities being sold to a new company controlled by Sun Capital Partners.
“The business will continue to trade without interruption, over 1,600 jobs have been transferred and the future of Dreams on the UK high street has been safeguarded.
“The remaining stores that are not included in the sale will remain open for business whilst the administrators seek to find buyers for these stores.”
As recent as yesterday, Dreams’ Public Relations company – Tulchan Communications – insisted the company was “not in administration”. Since then, the pre-pack deal has been confirmed.
Dreams and its parent company had been late filing its 2011 accounts so the latest information available to suppliers, landlords and credit insurers was only the trading figures and the balance sheet as at December 2010. These were due to be filed by the end of September 2012.
Speaking ahead of today’s news, Nick Hood, business analyst, Company Watch, explained that the fundamental problem was that Dreams had been struggling through the recession to generate enough profit to service the huge debts that it took on when it was bought by Exponent Private Equity in 2008.
He added: “The magnitude of the task [that faced] them was illustrated by the fact that the group had an interest charge of over £30 million in its last set of accounts. While Dreams itself made a profit of over £4 million, this was a drop in the ocean against an interest burden like that.”