Monsoon landlords want equity stakes in return for CVA support

By

Sandra Halliday

Published
May 31, 2019

Monsoon Accessorize’s attempt to reshape its business to give it a brighter future could run into a stumbling block as the landlords of the stores that it occupies make demands in return for supporting a possible company voluntary arrangement (CVA).

Reports have emerged suggesting that some of those landlords have written to the company saying they want an equity stake in it in exchange for their support.

Sky News said that four landlords, including British Land, Hammerson, M&G Investments and Roubaix Group, have linked up to negotiate improved terms with the company.

Their argument is that by accepting early closures or reduced rents, they're the companies that will largely be funding any turnaround.

Landlords had been in the frontline of the battle to save physical retail in the UK as large numbers of underperforming chains opt for CVAs in order to allow them to close unprofitable shops before their leases expire and negotiate significantly lower rental deals on others.

This has left many smaller operators in the property sector reeling as their primary sources of income ebb away.

With the value of their properties also potentially declining due to the difficulty in finding new tenants, this has meant landlords are seeking to realise value in other ways and holding stakes in retail businesses that have a chance of recovery are one way of doing this.

A source told Sky News that conversations about any proposed equity stake are at a very early stage but that the proposals are similar to those seen at Arcadia where equity stakes are also part of the company’s plan for its own CVA.

Loss-making Monsoon is working with Deloitte on what is, for now, only a possible CVA plan. It operates 271 stores with 126 of them being combined formats that include both Monsoon and Accessorize. These combined locations are said to be among the worst performers in the portfolio.