Monsoon Accessorize: full details of CVA confirmed
Monsoon Accessorize has become the latest high street chain to launch a major restructuring and has asked landlords for a cut in rents on more than half its stores.
The company confirmed that accountancy giant Deloitte has been appointed to run a Company Voluntary Arrangement (CVA) – an increasingly popular form of restructuring that companies use to avoid collapse.
However they are not without controversy, with landlords claiming retailers are misusing them to cut their costs. A string of retailers have entered into CVAs in recent months as a way to close stores and/or cut rent bills, including Arcadia, Debenhams, New Look, Mothercare and Select.
Monsoon is using its CVA to call for rent reductions on 135 sites out of 258 across the country.
In a statement the company said: “The current rent and occupancy costs facing the group are now unaffordable given the fundamental changes that have taken place in the retail sector, and a significant number of stores are delivering a negative contribution as a result.
“The companies therefore need to reduce the costs of their store portfolios to ensure their ongoing viability. No store closures are currently planned within these proposals.”
The company also revealed that credit insurance has been removed – meaning Monsoon must pay suppliers upfront, with insurers unwilling to cover the costs of any non-payments.
As part of the CVA proposals, Monsoon and Accessorize’s owner, Peter Simon, has already provided an emergency £12m loan – which will be repaid first if the company goes bust – and a further unsecured credit facility of £18m at 0% interest, to enable the turnaround plan to be implemented. The £18m will only be available if the CVA passes.
Simon has also said he would reduce rent on the company’s head office, which he owns, by 50%.
To encourage landlords to sign up to the deal, company bosses have proposed a profit share scheme, where they could received up to £10m if the stores are profitable and beat sales targets in future years.
A meeting will take place on 3 July where landlords will vote on the proposals.
Paul Allen, chief executive of Monsoon Accessorize, said: “Trading for the group has been difficult for some time, as it has been for much of the retail industry.
“In early 2016, we implemented a plan which initially delivered positive like-for-like store sales. However, in the two years that followed, overall like-for-like sales have decreased as market conditions declined.
“The proposed CVA is designed to reduce store operating costs and to bring the costs more in line with market rents.
“Through implementing the CVA and the shareholder credit facility, the group will be able to invest in the business, the brands, and in growing profitable sales channels – both in-stores and online.”