Arcadia CVA details: 23 UK/Irish stores to close, along with all 11 US sites
today May 22, 2019
Arcadia revealed some details of its long-rumoured company voluntary arrangement (CVA) plan late Wednesday afternoon. The company wants to close 23 stores (on top of a closure programme that has been going on for several years) and cut rents on another 194 due to a "highly competitive retail environment". The plan means that 520 jobs are at risk in the UK and Ireland.
And further afield, it's proposing that its US operation will close with an exit from all 11 of the Topshop/Topman stores there.
In the UK and Ireland, the group employs 18,000 people and operates 566 stores under the Burton, Dorothy Perkins, Evans, Miss Selfridge, Topshop, Topman, Wallis and Outfit brands.
The stores on the chopping block won’t shut immediately and employees and suppliers will continue to be paid on time and in full. The company will also aim to find jobs for affected staff elsewhere in the group.
The closures would hit Ireland quite hard with six closures there (four of them in Dublin), with Topshop/Topman, Evans, Wallis, and Miss Selfridge on the list.
Other closures across the firm’s chains would happen in Bedford, Cheshunt, Bluewater, Fareham, Glasgow, Luton, Newcastle upon Tyne, Nuneaton, Reading, Salisbury, Southend, Stirling, Swindon and York.
Along with these closures, a wider turnaround plan would mean more cost cuts, more store investment (which could go some way towards appeasing landlords as it would enhance store values) and a greater digital focus.
Arcadia's majority owner Sir Philip Green plans to inject £50 million into the business, on top of £50 million provided in March.
Landlords affected by the closures and rent reductions would get a 20% share of the equity value of the business if it's sold in the future. Earlier in the day, reports emerged that some landlords wanted the company to offer up to 40% of its equity in return for CVA approval and that the company would offer its Topshop London flagship’s freehold in exchange for a pensions contribution reduction deal.
The firm wants to halve its £50 million annual payments to its pension scheme, and is proposing that Green himself would inject a total of £100 million into the scheme over the next three years (in addition to the new money he's putting into the business itself).
Getting creditor support for the plan is now crucial as their votes are needed to get the CVA through. If Arcadia doesn’t get enough backing (it needs the support of 75% of its creditors), an immediate sale process is seen as the most likely next step, and if that fails, some or all of the business could be put into administration.
As well as landlords carrying a lot of weight on the creditors list, the views of the Pensions Regulator and the pension fund’s trustees are important with Philip Green having already seen how big an impact they can make in his long-running battles around the BHS pension scheme a couple of years ago. He was forced to inject hundreds of millions of pounds into that pension scheme, despite having sold BHS a year before it crashed. It was reported on Wednesday that the Pensions Regulator has objected to the Arcadia proposals.
The company will hold a meeting with creditors next month to seek approval of the measures it’s proposing under the CVA.
Chief executive Ian Grabiner said: “Against a backdrop of challenging retail headwinds, changing consumer habits and ever-increasing online competition, we have seriously considered all possible strategic options to return the group to a stable financial platform. Following constructive discussions with all key stakeholders, we believe that a CVA is a best course of action. This has been a tough but necessary decision for the business.”
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