Newsroom

Suits You saved as landlords fire warning shots over cynical use of CVAs

Landlords backed a company voluntary arrangement this afternoon for menswear chain Suits You with the vote being carried by 98pc.

However property chiefs have warned that any future CVAs would only be supported in genuine cases of hardship and not by firms wishing to use them to strategically downsize and to hive off underperforming stores.

The property industry was recently angered by news that Blacks Leisure planned to expand back into stores it has previously exited through the use of its own CVA. That was passed last November, but today the British Property Federation (BPF) said that the industry would stand firm against future CVA proposals that it considered to be a mis-use of the system.

Clintons also bought back Birthdays outlets after placing the firm into administration last summer, sparking a separate row after suggestions it made a profit from doing so.

Liz Peace, chief executive of the BPF, said:

“Landlords are caught between a rock and hard place. If they support a CVA, they’re accused of creating a two-tiered market, disadvantaging successful, well managed businesses by offering cheaper rents to their competitors. If they oppose it, they’re accused of sending the retailers under, even though they have absolutely no say in how the firms are run. Landlords do not force retailers into agreeing leases or into expanding beyond their capacity. Clearly there is resentment over abuses of the system, and we now need a public debate on how the system is taken forward.

“Several major landlords worked closely with KPMG to ensure that concerns about this CVA were allayed at an early stage, and this early communication was key to its success. There are now plans afoot to look at what clauses could be included in future proposals, to ensure that landlords would have a way of benefiting from the kind of miraculous recovery enjoyed by Blacks. Shortly after its CVA last winter, it then quickly announced plans to expand back into locations it had vacated.”

Duncan Grubb, head of credit control at Hammerson, said:

“We supported the SRG CVA as it was considered to be a genuine attempt to rescue and reposition a failing business, rather than an attempt to gain a strategic advantage. We have worked closely with KPMG, who have modified the terms of the CVA to provide greater visibility and avoid setting precedents. Future CVA proposals will be judged on their own merit, and attempts to misuse the system in order to benefit solvent tenants will be strongly resisted.

More company quotes may follow.

Media coverage

BBC News

The Times

Key differentiators on the SRG CVA:

• No stores closed on day one of the CVA;
• 42 non-profitable stores will continue to trade and will then close in 18 months time;
• Landlords of non-profitable stores will receive 60% of the full rent for 18 months (equating to 11 months’ rent);
• If landlords wish to take on new tenants, they can do so by giving 45 days notice.

For more information and all PR and media queries, please contact Andrew Teacher, Head of Media, on 020 7802 0113 /ateacher@bpf.org.uk or James Anderson janderson@bpf.org.uk

For further information on KPMG and the CVA details, please contact them directly

Sorrelle Cooper, Senior PR Manager at KPMG: 020 7694 8527 / 07932 078218 sorrelle.cooper@kpmg.co.uk

About company voluntary arrangements (CVAs):

Where a company is experiencing difficulties in paying its debts, the directors can propose a company voluntary arrangement (CVA) whereby the company enters into a legally binding agreement with its creditors, such as their suppliers or landlords. In a similar vein to an individual voluntary arrangement (IVA), which gives an individual an alternative to bankruptcy, a CVA enables a company and its creditors to come to a compromise agreement and avoid an administration or liquidation. A CVA can provide a company with some breathing space to allow it to reorganise or restructure its funding and/or its operations with as little disruption to the day to day trading as possible, with the control.