All Saints teams up with Lion Capital & Goode Partners

All Saints is on the verge of securing a £102m ($168m) rescue funding package from a private equity consortium to save itself from administration. But the deal has yet to gain the approval of the ailing retailer’s Icelandic shareholders.

Retail entrepreneur Kevin Stanford has launched an eleventh hour management buyout for his struggling fashion chain AllSaints, which is understood to be facing an imminent deadline to find a buyer or face the possibility of administration, wrote early this week the Guardian.

On Tuesday night, the retailer and its investors remained locked in discussions. A spokesman for Kaupthing confirmed a bid had been tabled, but would not comment on speculation the banks were now asking for £25m for their interests. All other parties declined to comment.

As reported by the Financial Times, Goode Partners, the US private equity  firm, has tabled a joint offer with UK-based private equity house Lion Capital, a consumer industry specialist that is invested in fashion chains including American Apparel and La Senza.

Lion Capital’s 11th-hour offer of support comes days after MSD Capital, the private investment fund of Dell founder Michael Dell, dropped out of bid talks. The private equity group’s interest in All Saints is rooted in the retailer’s potential to expand in the US. If the deal is successful, part of the £102m capital injection would be used to finance the opening of new All Saints stores in Washington and Chicago. These would take the number of US stores to 12, although the retailer trades from more than 100 stand-alone stores and retail concessions worldwide.

Following insiders´comments, both All Saints and its biggest shareholder, the retailer’s founder Kevin Stanford, are supportive of the deal. The funds are needed to recapitalize the business, pay down debt and finance its expansion in the US. Under the terms of the offer, the failed Icelandic banks Kaupthing and Glitnir would receive about £20m for the stake they inherited in the business following the collapse of Baugur, the Icelandic investment group.

All Saints has £53m of net debt, including a £28.5m working capital facility with Lloyds Banking Group. As part of the deal, Lloyds is expected to increase the facility to £40m. The bank has been supportive of the company during its search for fresh equity, leading Stephen Craig, All Saints’ chief executive, to describe its role as “a case study in relationship banking” last week.

However, the bank has retained KPMG as an adviser in the event that the company fails to agree a deal and needs to be placed into administration. At the end of March, takeover talks with a separate investment consortium, including Lebanese investment group M1 and former Goldman Sachs banker Richard Sharp, fell through.