Arcadia wins vote to launch CVA
Written by Hannah McGrath
Philip Green’s Arcadia Group came back from the brink of administration yesterday after creditors approved a total of seven Company Voluntary Arrangements (CVAs) aimed at securing the financial future of the retail empire.
At a crunch meeting in London yesterday, creditors voted through a series of the insolvency measures, which will see Green embark on a major restructuring of his network of High Street fashion brands, which include Topshop, Burton and Dorothy Perkins.
The CVAs will enable to Green to forge ahead with negotiating with landlords for rent cuts at around 200 stores and close a total of 48 stores across his 566 store network.
The vote comes after fears were raised that Green would fail to secure the requisite support of 75 per cent of creditors after Intu Properties, Arcadia’s second largest landlord, indicated it would vote down revised CVA proposals potentially tipping the company into the hands of administrators and putting up to 18,000 jobs at risk.
Green was forced to postpone a vote on the CVA last Wednesday and climb down over proposed rent cuts of 30 to 70 per cent, which have since been revised down in a move that it is understood could cost his family nearly £30 million over a three-year period.
In order to win backing from key landlords, including Land Securities, Green’s wife Tina, Arcadia Group’s majority shareholder, pledged to invest £50 million of equity into the Group, in addition to the £50 million of funding already provided in March. She also agreed to fund the cost of the amended rental reduction terms within the CVA proposals.
Following the vote, Ian Grabiner, chief executive of Arcadia Group, said: “The future of Arcadia, our thousands of colleagues, and our extensive supplier base is now on a much firmer footing.
“From today, with the right structure in place to reduce our cost base and create a stable financial platform for the group, we can execute our business turnaround plan to drive growth through our digital and wholesale channels, while ensuring our store portfolio remains at the heart of our customer offer.”
Responding to the result, Chloe Collins, senior retail Analyst at GlobalData commented:‘‘Although Arcadia’s CVA has been approved, it is unsurprising that it faced backlash from some landlords who have doubts about the retailer’s future.
She added:"Its leading brands – Topshop and Topman – still have a strong following among millennials, however many of the other, such as Miss Selfridge and Dorothy Perkins, are now irrelevant in a highly saturated market and chances of revival are slim, leading landlords to question whether other retailers could offer their spaces more longevity."