Kwik Save may sell off non-viable sites in rescue plan

The sale of sites to bigger rivals could play a role in any rescue plan for Kwik Save, the troubled British grocery chain recently bailed out by Irish businessman Brendan Murtagh.

Kwik Save won a six-day stay of execution in the English High Court yesterday after staff agreed to work next week without pay.

The company is facing the prospect of being put into administration by the court, a move which could ultimately see it wound up, but it won its fourth adjournment in three weeks on the back of the employees' pledge.

Mr Murtagh recently loaned Kwik Save €7.5 million to prop up the ailing business. He is understood to be actively involved in seeking finance for the rescue bid.

His money is secured by a debenture - effectively a mortgage over some of the company's assets - and is not in danger if the chain goes to the wall.

Kwik Save has around 230 sites in England and Wales. Many are in attractive locations in urban areas. It is understood that a rescue plan could involve the sale of some of these sites to big supermarket chains.

These businesses are looking at the possibility of developing convenience store-style outlets and a proportion of Kwik Save's properties are said to be ideal.

Kwik Save has already closed 101 outlets. Sources yesterday were not ruling out further closures, as some shops are not viable. If the business was rescued, it is likely that the chain would be slimmed down to the remaining viable stores and rebranded.

During yesterday's hearing Kwik Save produced the results of an informal canvass of workers showing that the majority of them were willing to work next week without pay to stave off administration proceedings.

It canvassed employees at the urging of the judge in the case.

Their union, Usdaw, warned that the move would not necessarily end the uncertainty hanging over the chain's future and demanded that their pay should be a priority should any rescue plan get the go-ahead.

The union's national officer, Joanne McGuinness, said: "Usdaw is pleased that the judge made it clear he understood the extreme financial pressure our members are under and that he decided to consult them in this informal way."

Mr Murtagh has no direct stake in the business apart from his loan. The agreement covering this does not allow for the debt to be converted to shares.

However, he is well-known for taking significant minority stakes in businesses.

He holds more than 40 per cent of property development group Howard Holdings and 50 per cent of the revived Smart Telecom business, which he rescued last year. Smart recently completed a €65 million refinancing, which included €50 million in debt from Irish and European banks.

Mr Murtagh founded listed building materials and insulation specialist Kingspan plc with his brother, Eugene.

He recently sold one-third of his holding for €50 million. It is understood that none of that cash is destined for Kwik Save.