Landlords this afternoon backed a company voluntary arrangement for Speciality Retail Group, which operates the Suits You, Racing Green and Young’s Hire chains.
Some 98% of the group’s creditors voted in favour of the CVA, which was proposed earlier this month. KPMG advised on the CVA.
SRG chairman Peter Lucas said: “We are delighted that we have been able to secure the support of landlords in finding a compromise on the business’ lease obligations.
“The landlords have shown incredible flexibility in voting in favour of our restructuring plans and we are appreciative that they have met us half way in securing SRG’s future.“
Richard Fleming, UK head of restructuring at KPMG, added: “If the creditors had not supported the company’s turnaround plans, it undoubtedly would have faced administration.
“The company now has a chance to focus its efforts on its successful designer outlet stores and wind down its loss-making high street presence.”
SRG wanted reduced rents on 70 loss-making stores over an 18-month period, with landlords retaining the option to sever the leases if they find new tenants at better rents.
Liz Peace, chief executive of the British Property Federation, said: “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 miraculousl recovery enjoyed by Blacks, shortly after their CVA last winter, who then quickly announced plans to expand back into locations they had vacated.”
Duncan Grubb, head of credit control at Hammerson, added: “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.
Sean Brew, director in the property management team at global real estate adviser, DTZ, said: “The attractiveness of this proposal will broadly hinge on the fundamentals of the properties occupied by the SRG brands.
“If the property is in a secondary location , or a poor configuration, which will be problematic to relet many Landlords may look upon the proposal favourably as it continues to be income generative and avoids void costs while allowing the flexibility to remarket the unit.
However, there will be instances where the property is in a prime location where a landlord will take a harder view.”
Garry Brett, insolvency expert and partner in the real estate team at law firm Stevens & Bolton LLP, added: “This decision is a welcome one, as it strikes a fairer balance between the competing interests of retailers and landords in what is still a turbulent retail sector.
“Essentially landlords are taking a commercial view on their income stream (receiving 60% of contracted income, plus having the rates paid), and being able to market the premises to potential tenants during the run off period.
“This represents a fairer deal for landlords, and a start in redressing the perceived imbalance created by the Blacks Leisure and JJB Sports deals. KPMG has set a new benchmark with this one.”
samantha.mcclary@estatesgazette.com
