Paperchase has set out proposals for a company voluntary arrangement for its 145 shops, which puts 28 stores at risk of closure.
The CVA proposals divide the stores into six categories. A total of 28 category 5 and 6 sites will experience a 50% rent reduction for three months, following which there will be either a rent-free period or a closure and exit.
Turnover rents have been proposed at 70 sites in categories 2, 3 and 4, with varying, guaranteed minimum base rents ranging from 35% to 80%.
Of its estate, 45 sites in category 1 will largely remain unchanged.
Figures from Radius Data Exchange show that Paperchase’s portfolio measures 329,000 sq ft altogether.
Creditors will vote on the proposals, which require at least 75% approval, on 22 March. KPMG will oversee the process.
Will Wright, restructuring partner at KPMG and proposed supervisor of the CVA, said: “Over the last 50 years, Paperchase has grown to become one of the UK’s most well-known and innovative design-led stationery retailers.
“However, like many other businesses in the retail sector, the company has been adversely affected by a cocktail of well-documented issues, including a reduction in footfall, increased rents and business rates, and margin pressure from sterling depreciation.
“Today’s announcement follows a detailed strategic review of the business undertaken by the company’s directors, during which a series of consultations with key stakeholders took place at which soundings were taken on whether they would be supportive in principle of the company proposing a CVA.
“We believe that what has been put forward today reflects the feedback received during this process, and specifically, gives the company the ability to rationalise its store portfolio by exiting stores that are unprofitable, secure rent reductions where stores are over-rented and implement turnover rents to reflect the highly seasonal nature of the business.
“As part of the review, the directors have also been successful in negotiating a financial restructuring with the company’s lenders, which will enable new investment to come into the business. Such additional investment and the completion of the wider restructuring is however conditional on the approval of the CVA proposal and successfully concluding the subsequent challenge period.”
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