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Arcadia CVA: rescue deal approved by creditors in knife-edge vote

Lauretta Roberts
12 June 2019

Sir Philip Green’s Arcadia retail empire has scraped through plans to close stores after a knife-edge vote received the backing of landlords.

The group – which owns Topshop, Burton, Wallis, Evans, Miss Selfridge and Outfit – confirmed at 5pm on Wednesday that its company voluntary arrangements (CVAs), for which there was one for each of its brands, had all been voted through at a reconvened meeting of creditors.

It means around 1,000 jobs are at risk as 23 stores close under the CVA, while another 25 will be shuttered as part of a wider restructuring.

Landlords have agreed to stomach rent cuts of up to 50% on nearly 200 further stores, after Sir Philip Green (via his wife Lady Tina Green in whose name the company is held) sweetened an earlier proposal (which was rebuffed by landlords last week) by agreeing to plough more money into the business to offset rent cuts and reduce the percentage of the cuts requested.

Arcadia’s CEO Ian Grabiner released: “We are extremely grateful to our creditors for supporting these proposals and to Lady Green for her continued support.

“After many months of engaging with all our key stakeholders, taking on board their feedback, and sharing our turnaround plans, 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.

“I am confident about the future of Arcadia and our ability to provide our customers with the very best multi-channel experience, deliver the fashion trends that they demand, and ultimately inspire a renewed loyalty to our brands that will support the long-term growth of our business.”

The proposals were passed at the second meeting, which came a week after the first was postponed. The initial vote was adjourned after it became clear that there was not sufficient support among landlords.

Even though Sir Philip and Lady Green sweetened the deal, the CVA remained contentious and some landlords were still reported to have voted against it, including shopping centre operator Intu, which has 35 Arcadia stores across its properties.

Speaking to the press after the meeting but before the result, Oliver Buhus from supplier Paragon Clothing said landlords had been “ruthless and self-serving”.

“There’s no sense of taking an initiative to act collectively, it’s each landlord for himself,” he said.

The proposals, which were launched last month, involve the closure of 23 stores in the UK and Ireland. Another 11 Topshop and Topman stores in the US were earmarked for closure, while an additional 25 Miss Selfridge and Evans stores were also slated to be axed.

In total, at least 1,000 employees are likely to be affected.

The initial plans also included a reduction in the company’s contributions to its pension fund, alongside a fresh injection of cash into the scheme.

However, Arcadia agreed with the pensions watchdog last week that Sir Philip would contribute another £25m – bringing the total cash and security package to the value of £310m.

Frank Field MP, who chairs the Work and Pensions Committee, and has been a thorn in Sir Philip’s side over the collapse of BHS, welcomed the decision, but called on the businessman and his family to make a binding promise that whatever happens, pensioners will get their full entitlement.

He said: “Now that, thankfully, Arcadia’s life has been extended, the committee will try to ensure that the Pensions Regulator gets an effective programme in place to ensure that Arcadia staff receive in full the pensions that Sir Philip and Lady Green have promised them.”

The city had mixed reactions, with some welcoming the jobs the deal has saved, and others questioning what this means for future CVAs.

Responding to the decision, Melanie Leech, chief executive of the British Property Federation, said: “CVAs are never easy as property owners are being asked to absorb large losses, which impacts the investment that these owners manage, including many of our savings and pensions. However, ensuring a sustainable future for the UK retail sector is equally critical to both the property and retail sectors.

Property owners will now want to see Arcadia’s leadership committed to delivering its turnaround plan to restore the long-term health of the business.”

Meanwhile Chloe Collins, senior retail analyst at Global Data, said: "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.

“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.”

Speculation began early this year that Sir Philip would look to either sell off the company, or close stores. In March, Arcadia confirmed it was exploring options to improve efficiency in the business.

Later that month, it hired property advisers to assess its estate while drawing up restructuring plans.

In April, US investor Leonard Green & Partners sold its 25% stake in Topshop and Topman back to the parent company, in a move which Arcadia said simplified its structure and would allow the board to focus on restructuring.

The news comes just weeks after Sir Philip failed to achieve billionaire status in the Sunday Times Rich List for the first time in 17 years.

His reputation has been left damaged by the 2016 collapse of BHS, which resulted in the loss of 11,000 jobs. The tycoon faced criticism for his handling of the retailer and eventually agreed to pay £363m of his own money into the its pension pot.

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