BHS administrator costs £1.3 million more than expected

18 January 2017

The Work and Pensions Committee has published correspondence with the concurrent administrators of BHS, Duff & Phelps and FRP Advisory, which show that the costs of the administration were £1.3 million higher than estimated in June 2016.

Duff and Phelps expected to charge over £4 million

The original administrations, Duff & Phelps, now expect to charge just over £4 million for their work, compared with an original estimate of £3.5 million. That comes despite an arrangement which saw FRP Advisory appoint concurrent administrators at the behest of BHS. FRP Advisory took on exclusive responsibility for investigations into Sir Philip Green, Dominic Chappell and their respective companies, fellow directors and advisors. In the case of Sir Philip and his companies, Duff & Phelps did not commence any such work.

In their response, Duff & Phelps listed further elements of the administration that had not been completed at the point BHS went into liquidation on 2 December 2016. These included the finalisation of liabilities and claims against different parties and agreeing the surrenders of leases and commercial disputes. The remaining work will be conducted by FRP Advisory as liquidators of BHS. That company's work as concurrent administrator will cost around £800,000.

Disagreement over liquidation timing

The correspondence also documents disagreement between Duff & Phelps and FRP Advisory about the timing of liquidation. FRP Advisory argued that creditors were better served by an earlier liquidation but this was resisted by Duff & Phelps.

A further letter being published, from the PPF, begins to shed light on the £35 million charge – the amount initially offered to the BHS Trustees for the pension fund by Sir Philip Green but then withdrawn – that was forwarded to Sir Philip's account by Duff & Phelps but then returned after "dialogue initiated by the concurrent administrators, FRP" when they were appointed. Duff & Phelps' initial response is attached but the Committee is pressing for further explanation of this transaction.

Chair's comment

Rt Hon Frank Field MP, Chair of the Committee, said:

"The costs of the demise of BHS continue to spiral as the pensioners wait for Sir Philip Green to sort the pension fund. The PPF are already left scrabbling for a few pence in the pound from what is left of the wreckage of BHS. Meanwhile Duff and Phelps, who were appointed by Sir Philip, have left with half a million more than they expected for doing substantially less of the administration than they expected.
The return of the £35 million paid to Arcadia by Duff & Phelps vindicates the PPF's decision to appoint administrators independent from Sir Philip. We are inquiring further into the circumstances of this transaction, which was not authorised by the co-administrator. If it was such a completely standard move, as Duff & Phelps claim, one wonders why it was reversed by the co-administrators as one of their first acts upon being appointed, and why the PPF seems to take a rather different view."

Further information

Image: PA