PowerHouse’s parent company Pacific Retail Group (PRG) has agreed to hand over its own financial records to a group of landlords seeking to revoke the electrical retailer’s controversial company voluntary arrangement.
At a directions hearing, the companies court ordered PRG to disclose the records by 2 June, together with non-privileged documents upon which PRG based its conclusion that liquidation was “not a viable option” for PowerHouse.
The landlords claim that the records will show PRG is “much healthier” as a result of the CVA, and that the parent company used the arrangement to turn PowerHouse “from an insolvent to a solvent company” at their expense.
The group, which includes Land Securities, Prudential, Hammerson, Slough Estates and Morley Fund Management, have been given until 27 June to file evidence supporting their legal bid to revoke the CVA . A five- to seven-day trial is scheduled to start after 24 October.
PowerHouse used the CVA, which was approved by a majority of creditors in February, to close 35 loss-making stores while paying landlords only a fraction of the rental obligations. The retailer has continued to operate 53 profitable stores within the UK.
However, the landlords claim that the CVA sets a precedent for financially unstable companies to terminate parent company guarantees without compensation, and results in other creditors being paid to the detriment of landlords.
They say that although key trade suppliers clearly wanted the company to remain solvent through the use of a CVA, rather than go into liquidation, the landlords were inadequately involved in the decision, and liquidation may have been a “fairer” option.
In ordering disclosure, Mr Registrar Simmonds granted permission for each side to instruct two experts a surveyor and an insolvency practitioner at the trial. The landlords have insisted on the latter expert to provide an independent comparison between the effects of the CVA and liquidation.
References: EGi Legal News 12/05/06
