Creditors for British Home Stores (BHS) will today vote on taking a Company Voluntary Arrangement (CVA) to cut rental costs across for its 164 stores.
The retailer, owned by consortium Retail Acquisitions, has debts of over £1.3bn, including a pensions deficit of £571m, reports the BBC.
The retailer has divided its stores into three groups based on profitability. Under the terms of the proposed CVAs, 77 stores will be unaffected, a reduction in rent is being sought for 47 "viable" stores, while 40 stores will continue to trade for a minimum of 10 months whilst negotiations with landlords are undertaken to reduce the rents substantially. It is hoped that store closures will be kept to a minimum.
50% of its landlords and 75% of its creditors will have to agree to the deal to see it executed. Administration, placing the jobs of 10,000 workers, is the likely outcome otherwise. Either way, BHS has warned that it requires additional funding to trade beyond 25th March.
Darren Topp, CEO, comments: “The CVA proposal that we have announced is a necessary milestone in resetting British Home Stores to ensure its long-term future as an iconic British retail brand. Some of our stores are loss making as we are being charged rents that are too high relative to today’s market. The CVA will address this issue.
“Although a difficult process to go through, this sets in motion the comprehensive updated turnaround plan that we have identified, and gives British Home Stores a secure financial footing from which to grow and deliver sustainable profitability. BHS will continue to trade as usual and we thank our staff and customers for their continued support.”
The biggest creditor, the Pension Protection Fund, was elected not to vote today, giving the company and landlords time to address the problem before it calls in its debt.
