Arcadia to stage board meeting to decide on CVA

Arcadia is set to stage a crunch board meeting tomorrow to make the decision on whether to launch a CVA, which could result in the closure of fewer than 50 of its stores.

According to Sky News, the business will press for a CVA if it feels confident of gaining the support of creditors, landlords and pension trustees for the move. Under the terms of a CVA, 75% of creditors by value have to approve the process before a company can proceed.

If it is felt that a CVA will not be approved, the company will launch a search for a buyer in the coming weeks, the news outlet reports.

Tomorrow's board meeting will be chaired by Jamie Drummond Smith, a corporate restructuring expert who was appointed to Arcadia's board earlier this month as interim chairman. He was formerly finance director and chief restructuring officer of Cattles plc.

This morning it was reported by The Times, that the company had gained the support of HSBC to cover its debts to suppliers who had been demanding up-front payments after some credit insurers removed cover.

Arcadia has also appointed advisers at Deloitte and property advisers GCW to assist on its restructuring plans. It is anticipated that landlords could resist the move to launch a CVA to enable store closures and rent reductions given Sir Philip Green's personal fortune and the fact that the company reported a profits in its last financial figures (albeit its figures are expected to have worsened considerably in the meantime).

The CVA is a controversial insolvency process that enables companies to pay back a proportion of their debt over a period of time and is increasingly being used by retailers to reduce their store portfolios and reduce rents. New Look, Mothercare and Select have recently used the process, although Select ended up in administration. Debenhams is also set to launch its CVA having been acquired by a consortium of its lenders.