CNBC Comment: The truth behind Peacocks’ demise

HAVING gone bust over a year ago, failed fashion chain Peacocks is living up to its name and preening for all it’s worth. With the help of Lawrence Tomlinson, entrepreneur-in-residence to Vince Cable, the old bird seems to be trying to pin the blame for its 2012 collapse on RBS.

In fact, thanks to Tomlinson – whose recent report suggested that RBS deliberately drove firms to the wall for its own benefit – a roll-call of failed companies are lining up to implicate the bank. For former Peacocks chief executive Richard Kirk, it has been a full-feathered display. But the arguments don’t really fly. Where is the evidence of this RBS turkey shoot?

In 2006, Peacocks was delisted from the stock market in a £404m deal backed by hedge funds Och-Ziff, Perry Capital and a coterie of smaller backers assembled by Goldman Sachs. Before the buyout, Peacocks had about £70m of net debt; after, this ballooned to £460m. This included the cost of the acquisition and a payment in kind (PIK) note charging 17.2 per cent. By 2010, the PIK had snowballed to £301m.

Meanwhile, Kirk received £4.8m in salary and bonuses over the four years, including a 60 per cent pay rise in 2010.

Two years later, Peacocks had collapsed under the weight of £700m in debts and a series of expensive leases. Insiders say the last minute deal chased with a Monaco businessman amounted to little, and RBS, along with the other 14 syndicate lenders, was left with the choice of injecting more capital into a non-viable business or administration.

And it’s not just Peacocks. HMV, the failed CD store, Clintons, the gift card shop, and property group Connaught all shared RBS as a lender. But they also had too much debt, mismanaged their working capital, and failed because their business models no longer worked in the structures created.

RBS might not be perfect, but it worked alongside HMV for more than a year to try and sell off divisions, and injected £25m of capital into travel agent Thomas Cook, saving 32,000 jobs and safeguarding 250,000 holiday-makers. Around 800 companies each year go into RBS’s workout group. Just 10 per cent end up in administration. The rest enjoy the benefits of relaxed covenants and pushed out repayment bullets. After about three years, most are sent back to the good bank, sold or re-financed – like Pendragon and Samsonite.

Blaming RBS may sit well with some, but in truth, it’s for the birds.

Helia Ebrahimi is UK business editor at CNBC. Follow her on Twitter @heliaebrahimi

This article was amended on Tuesday 10th December. Peacocks, HMV, Clintons, and Connaught were not mentioned specifically in Lawrence Tomlinson's report. The Tomlinson report does not disclose which companies its evidence comes from.