Arcadia reveals CVA proposals

Sir Philip Green’s plans to restructure his Arcadia Group empire through company voluntary arrangements have been unveiled, with only 23 stores proposed for closure.

The group, whose brands include Topshop, Miss Selfridge and Wallis, said it had identified 23 potential closures (see below) out of its 566 trading locations in the UK and Ireland, under seven CVAs.

If the plans are approved by creditors, a further 194 locations will be subjected to rent cuts and revised lease terms.

The remaining 394 locations would be unaffected.

Lady Green, the group’s shareholder, will inject £50m of equity into the group to support the turnaround, on top of an additional £50m provided in March.

She would also provide all affected landlords with an entitlement to a pro-rata share of 20% of any equity value in the group upon a future sale of the group.

Landlords would additionally be able to claim against a £40m compromised creditor fund, and will not suffer any compromise of dilapidations on stores that are presently occupied.

Deloitte has been appointed to oversee the CVAs. Creditors will vote on the proposals on 5 June.

As part of the turnaround, Arcadia is also restructuring its US operations, which may result in all 11 of its US shops closing.

Ian Grabiner, chief executive of Arcadia Group, said: “Following constructive discussions with all key stakeholders, we believe that a CVA is the best course of action to reduce our fixed cost base and ensure we can continue meeting our commitments to pension trustees, staff, creditors and our extensive supply chain for the long term, while continuing to serve customers through our portfolio of quality fashion brands.

“We have in place a well-developed turnaround plan for the group, which includes driving cost efficiencies and managing the refreshed retail store estate and investing in the continued development of our multi-channel proposition and logistics.

“This has been a tough but necessary decision for the business. We will ensure all potentially affected colleagues are kept fully informed as we seek approval from our creditors on today’s CVA proposals.”

Ion Fletcher, director of finance and commercial policy at the British Property Federation, said: “These situations are never easy, as property owners need to take into consideration the impact on their investors, including those protecting pensioners’ savings via investment into property, as they vote on the CVA proposal.

“Arcadia and Deloitte engaged with the BPF before launching its CVA proposal. This has provided us an opportunity to improve understanding of property owners’ interests and concerns, but ultimately it will be for individual property owners to decide how they will vote on a CVA.”

Additionally, Arcadia said it remains in discussions with the trustees of its two largest pensions schemes, the Pensions Regulator and the Pension Protection Fund.

The company had previously been paying £50m per annum in contributions to the schemes. As part of the restructuring, the proposals aim to reduce contributions from the company to the schemes from £50m to £25m per year for three years, with security over certain assets being granted in order to provide support to the schemes.

Arcadia said Lady Green had offered to bridge the shortfall with £25m of funding per year for the next three years, plus an additional £25m contribution. This means total payments from her into the schemes will tally another £100m.

EG previously found that intu, British Land and Arcadia’s property-owning arm, Redcastle, owned the largest proportion of stores in Sir Philip Green’s retail empire, meaning that they had the most exposure to a potential store restructuring.