Struggling department store chain BHS will live to fight another day after creditors and landlords today voted in favour of a restructuring deal to slash the rent bill for its 164 UK stores.
The company said 95 per cent of creditors approved a Company Voluntary Arrangement (CVA) for 125 stores at a meeting at the Novotel Hotel in Hammersmith this morning – well above the 75 per cent needed for the vote to pass.
A vote for the remaining stores, held in a separate holding company, was also approved at a separate meeting this afternoon. KPMG is handling the restructuring process.
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BHS' owners Retail Acquisitions had asked landlords to cut rents by either 50 per cent or 75 per cent at 47 of its stores to help the business stay afloat and safeguard jobs.
It was also seeking to "reduce rents substantially" on 40 of its least profitable stores while keeping rents at 77 stores unchanged but paying on a monthly instead of quarterly basis.
BHS hailed the CVA as "a significant milestone" enabling the homeware and clothing chain to continue its turnaround plan and safeguard the future of BHS, protecting thousands of UK jobs.
Landlords affected by the CVA included Land Securities, Intu and Standard Life Investments (SLI), among others. Ed Jenkins, head of UK retail at SLI, which has six BHS stores in its portfolio, said: "Whilst this situation is unfortunate, our priority is working to deliver the best long term solution for both our assets and investors.”
BHS was part of retail tycoon Sir Philip Green's Arcadia empire until he sold it last year for £1m to a little known consortium of little-known investors led by former racing driver Dominic Chappell.
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It is currently saddled with debts of over £1.3bn and is in talks with the government's rescue agency, the Pension Protection Fund and the Pensions Regulator over its pensions deficit of £571m.
Malcolm Weir, the PPF's head of restructuring and insolvency, said it had abstained from the vote whilst it is in talks with the company, despite being its biggest creditor: "The PPF will be working with the company over the coming months to find a solution. However failure to reach a compromise may still result in insolvency. Members of the pension schemes continue to be protected."
Under chief executive Darren Topp, BHS has also kicked started a restructuring programme in an attempt to turn itself around, which could result in the loss of up to 350 jobs. It is expected that 150 jobs will go at the company’s head office. It has also pushed into the convenience food sector, with plans to open around 60 food concessions inside its stores this year.
The company is now trying to raise an extra £100m of funding to continue trading and confirmed at the meeting that it is in the process of securing a £60m from restructuring firm Gordon Brothers as part of that funding.
It also confirmed that it is close to agreeing a deal over its Oxford Street store, as first reported by City A.M., that could see it share space with other retailers.