How the Barkley family loses control of their trading empire

If Aidan Barclay was feeling the strain of his family's financial troubles, he didn't show it as he welcomed the deal with its Very Group retail empire.

IMI's support from Carlisle and Abu Dhabi will be «invaluable» as it will provide «long-term, experienced institutional backers» who can «understand our business very well,» he said.

At the heart of this rhetoric is the couple's £125 million lifeline to Very, which has been at the mercy of the Barclay family for decades. However, gradually it seems to be slipping away.

Aidan and his brother Howard have paid a high price for having to give up a degree of control in exchange for a much-needed injection of funds. Directors say it has enough cash to last until at least June 2025.

The package, worth around £85 million, all from Carlyle, will be available immediately. Both Carlyle and IMI will have seats on the company's board of directors, giving them significant influence over the day-to-day management of the business and its long-term future.

For IMI – International Media Investments – this marks a departure. The company is otherwise an arm of Sheikh Mansour's global media ambitions and has found itself in the world of Veri's flat screens with hire purchase options as part of its bid for control of The Telegraph along with RedBird, the US private equity firm.

In December, RedBird IMI, a fund 75% backed by the sheikh, lent Barclay's family £600 million to help pay off a £1.2 billion debt to Lloyds Banking Group in exchange for option to convert debt to the owner of The Telegraph.

The plan is currently in limbo and under regulatory scrutiny as a potential threat to press freedom.

The balance of the Lloyds loan, ten years overdue, was provided directly by IMI and insured by Very and related companies with him. resources. It was through this loan that «a private equity firm focused on building a portfolio of quality media assets around the world» earned a seat on the board of directors of the mail order company formerly known as Littlewoods.

At least the Sheikh is more familiar with Carlisle. The company's seventh-largest shareholder is Abu Dhabi sovereign wealth fund Mubadala, whose stake is worth almost £750 million.

For Barclays, the duo means even more debt. Over many decades, the family amassed a vast collection of assets that at one stage spanned media, retail, luxury hotels and real estate — an empire built on borrowing that began to unravel.

It is difficult to get a full picture of the health of the Barclay family businesses due to the very complex structure they are in, including Very. Ownership is opaque due to a giant web of companies that usually ends up in offshore jurisdictions that require minimal disclosure.

However, the tension is most evident at Very, which provides credit to customers to purchase a diverse range of products. , including clothing, shoes, furniture and gifts. The company's total debt exceeded £2.5 billion.

The collapse of Greensill Capital in 2021 forced Very to quickly repay that £280 million loan. This prompted the group's leading UK company, Shop Direct Holdings, to approach Carlisle, a renowned Wall Street pundit. The loan, of which £123 million went to Aidan to repay loans he made to the company, is due to be repaid in July.

Aidan Barclay said Carlyle and IMI's support for Very Group would be «invaluable»; Photo: Oli Scarff/Getty Images

Carlyle's loan was very expensive. It provided for a harsh interest rate through a complex debt instrument called a payment-in-kind switch. Very can either pay interest in cash at a high rate, or increase the total amount owed at an even higher rate.

Carlyle declined to comment on the status of the loan following its latest cash injection, which moved further down Very's chain of companies and saw it presented to the board for the first time. «We look forward to working closely with them [very much],» said Carlyle's Taj Sidhu.

Carlyle's decision to intervene again came after consultation with heavyweight advisers from US law firm Akin Gump Strauss Hauer & Feld and investment bank Jefferies.

Barclays will share a board more than 20 years after Aidan's father, Sir David, and his twin brother, Sir Frederick, bought Liverpool-based Littlewoods for £750 million.

They merged it with a division of the conglomerate Great Universal Stores, a home shopping business, has abandoned hundreds of stores as the company sought to transform itself into a more modern online retailer.

The Littlewoods catalog was discontinued in 2015. By the way, in 2008 its name was changed to Shop Direct, and then, in 2020, as a result of another corporate rebranding, it became Very Group.

Carlyle and IMI paved the way for themselves after several The family's attempts to cash out the money were unsuccessful. .

In 2017, executives were called home from holiday as the lengthy sale process reached its climax, with private equity firms Apax and BC Partners offering Barclays more than £2 billion for their shares. However, at the crucial moment, Aidan said they would not sell it for less than £3 billion.

Plans then emerged for a blockbuster stock market flotation in 2021, although the proposed move raised eyebrows across the City. This would be the first time the family has floated one of its flagship companies on the public markets.

However, they were encouraged by the successful £575 million bond issue. Very also saw record trading during the pandemic, turning over almost £2.4 billion amid a boom in flat screen TVs, sportswear and textiles, helped by low interest rates.

Again, valuations proved stumbling block. Barclays believed that the shift from brick-and-mortar to e-commerce would allow it to set prices on the same terms as Ocado or even Amazon.

A source close to the flotation discussions said: “The range of valuations was huge. The family tried to value it on a technology multiple, as if it were Amazon, at £4 billion. The banks said it was a subprime consumer lending business and was worth just £1.4 billion.”

The business was quickly valued at £4 billion, almost 50 times its previous valuation assessment. — tax profit that year was £81.7 million — the highest in the company's history.

But the enthusiasm was short-lived. Market volatility and the subsequent fall in tech share prices since the end of the pandemic prompted Barclays to shelve those plans.

Carlyle and IMI must now try to guide Very and a group of worried fellow lenders through a much less favorable environment. water.

Clive Black, an analyst at Shore Capital, says Very's prospects, like any remaining hopes of wooing the City, have been dented by the sharp change in interest rates.

“There have been dramatic changes in the credit cycle,” Black says. “This will cause Very to go backwards and so will its valuation. This has been a real challenge for them and their customers.”

Retailer Mike Ashley negotiates £35 million Very Credit financing: Jamie Lorriman

More than 90% of sales are financed through a £1.6bn “securitization vehicle” — a consumer loan — provided by a consortium of banks. HSBC is by far the largest player in this consortium. Very is also a NatWest client.

In December, Very announced a £50m extension to its securitization fund. In a sign that the company is flirting with more unorthodox sources of cash, billionaire retail entrepreneur Mike Ashley negotiated a £35 million deal that came to nothing.

Very's half-year results , published on Tuesday, showed sales rose just 0.6% to £1.27bn from May to December 2023, while the company made a £2m loss after a £2.1m profit sterling in 2022. financial costs, which increased from £70.4 million to £96.9 million.

Uncertainty about the true state of the company's finances is compounded by an unconventional structure in which large commissions are paid to other businesses under family control. Very spent £67.4m on “service acquisitions” in the six months to December 2023, including £44.1m from Yodel, the delivery business recently rescued from collapse by a rival.

The company also owes a further £517 million from its «group partners», including £503 million from Shop Direct Holdings Limited.

Where Carlyle and IMI now fit in the family's financial structure remains to be seen. Barclays has pledged a number of UK companies as collateral to IMI, including Very Group.

This is alongside a similar pledge to Carlyle, which was given collateral against various family assets to secure the initial loan. This is believed to include the Cayman Trust's stake in the Beaumont Hotel in Mayfair.

The Barclays hope the latest cash injection will provide some respite and stability after a torrid few months. Giving up some control over their biggest asset won't be easy for the family. But after decades of debt-fuelled deal-making, their options have narrowed.

Aidan Barclay said: “[Carlyle and IMI's] commitment underlines the confidence they have in the group and their contribution to the board will be invaluable significance as we look to the future.»