The Body Shop's downfall triggered by failing to secure credit

By Austyn King | Published: 22-Apr-2024

The beauty company’s owner Aurelius Group failed to secure new funding, according to reports in The Telegraph

The Body Shop fell into administration after its new owner failed to secure fresh funding following HSBC withdrawing its line of credit. 

Aurelius purchased the British beauty brand for £207m in November 2023 from Brazilian cosmetics giant Natura.

HSBC withdrew its line of credit following The Body Shop's sale which contributed to a shortfall of at least £100m, according to The Telegraph.

The financial gap is said to have caused the 48-year-old brand to fall into administration in February just three months after the purchase.

HSBC gave The Body Shop at least 18 months’ notice following its withdrawal, during which time Aurelius did not secure new funding for the business. 

However, a source told The Telegraph that Aurelius was never made aware of HSBC’s decision to stop lending and only discovered the extent of The Body Shop’s financial troubles after completing the acquisition in January 2024. 

“Following completion of the sale, the company was informed by its bankers that they intended to cease providing banking facilities,” stated documents released by The Body Shop’s administrators FRP.

The Body Shop was subsequently cut off from tens of millions of pounds of credit, which was said to result in a “substantial unplanned cash outflow from the business”.

“These events combined gave rise to a forecast peak funding requirement for the company in excess of £100m, significantly greater than the requirement identified as part of the acquisition process,” added the administrators.

“The substantial difference between the anticipated funding requirements and the reality of the company’s position, combined with the business’ poor trading performance, meant the shareholders could not commit to the required level of funding.”

The news follows claims that millions of pounds were taken out of the business before its collapse into administration, which FRP is currently investigating.

The Body Shop’s downfall has seen the retailer shutter 197 stores across the UK, resulting in approximately 489 job losses.

Cosmetics Business has contacted Aurelius for comment.

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