BHS, the iconic retailer of UK high streets, was owned by Sir Philip Green for a period of 15 years until he sold it for £1 to the Arcadia Group, in March 2015. The Company (BHS) had been making a loss for the last seven years prior to the sale and had been operating with a pension deficit of some £571 million. It is thought that if the Company were to fail then, potentially, the overall cost to its creditors could be as much as £1.3bn.
As a result BHS appointed KPMG to explore a number of options in an attempt to stave off a formal insolvency procedure. The favoured option was for the Company to enter into, with the support of its creditors, a Company Voluntary Arrangement (CVA).
Will Wright, restructuring partner at KPMG and proposed ‘supervisor’ of the CVA, said:
"For almost 90 years, BHS has been one of the most iconic brands on the UK high street, but in recent years has seen its profitability decline as it has sought to respond to changing customer behaviours, increased competition and the rise in omni-channel retailing. Today’s CVA proposals are one facet of a wider turnaround plan, and specifically tackle one of the business’ largest fixed costs, the onerous lease arrangements across its UK-wide store portfolio.
"While the company’s store estate is located across favourable retail locations, a number of these leases are unsustainable, predicated on terms which were originally negotiated some decades ago. With the support of its lenders, shareholders and landlords, the company will be able to reshape its debt and operational structure to a model more suited to today’s multi-channel retail environment. The company needs to secure at least 75% creditor approval for these CVAs."
The creditor’s meeting took place in London on Wednesday 23 March 2016 and the CVA was approved with a vast majority of the creditors voting in favour of the proposals put forward by BHS and their advisers to the delight of the Company. Mr Topp, their Chief Executive, stated:
"We are delighted that we have the support of landlords and creditors. But we are under no illusions. This is the start. Me and my team now have to roll our sleeves up. We want to make it an iconic British brand again. There will be no popping champagne corks tonight. We would like the British public to give us a second chance. Come and see our stores and you will be surprised."
The passing of the CVA now allows BHS to continue to trade and to attempt to turn their financial position around with the creditor position certain, as set out in the CVA, over the short and medium term.
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