Restructuring option for discount fashion chain hit by downturn

The company, which appointed former Asda boss Allan Leighton as chairman in April, is struggling under £240m of net debt and the squeeze in consumer spending.

Independent advisors at KPMG have been drafted in to prepare a review of the group’s finances, according to a Sunday newspaper. It is understood this could lead to more cash being injected into the business by its private equity shareholders.

Despite its value offering it is understood that sales growth in the UK has slowed in recent months amid the financial gloom. However, the group is enjoying success overseas, particularly in Russia.

A source close to the company, which last week launched its latest clothing collection designed by celebrity Pearl Lowe, said: “The business continues to trade relatively well given the challenges on the high street and is looking to put the right capital structure in place so it can continue its development in the UK and overseas.”

In its last annual report for the year to April 2010, the Cardiff-based company made a £56.7m pre-tax loss after operating profits were more than wiped out by finance charges, according to the newspaper. Sales grew six per cent to £720.9m.

The group was left with huge borrowings when it was taken private by investors, including Goldman Sachs, Och-Ziff and Perry Capital, and its management in 2005.

Peacocks was put up for sale last year but the auction was scrapped when it failed to garner enough interest.

Earlier this year, it tried to raise funds by selling Bonmarche, its chain for older women, but this also fell through.