Next demands rent cuts on par with its struggling neighbours

Alys Key
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The retailer wants to be treated equally to its peers (Source: Next)

Next is taking a stand against a wave of rent cuts handed out to its high street peers by demanding equal treatment from landlords.

Following a series of company voluntary arrangements (CVAs) in the retail and restaurant sectors, Next is asking landlords to agree to rent reductions on its stores if a neighbour receives a similar deal through a CVA, according to The Sunday Times.

A CVA is a form of insolvency process which allows a company to ask for significant rent reductions, which is often impossible under existing terms with landlords which mandate upward-only rent reviews.

Next is reported to be asking for a "CVA clause" when renegotiating leases. This would give it a rent cut if any of its neighbours manages to gain a reduction through the process.

Retailers which have used the process since the start of this year include New Look, Carpetright, Mothercare and Select. The move is not always a guarantee against collapse, as shown by the administration of Toys R Us just months after it secured a CVA from creditors.

Despite a recent rash of CVAs, analysis by law firm RPC released today indicates that the popularity of the process has dropped in the last few years.

In the year to March 2018, there were 15 retail CVAs, a 55 per cent drop since the comparable period ending in March 2013 when there were 33 CVAs.

“For under pressure retailers, a CVA may represent a neat solution to its problems for a short period of time," said Tim Moynihan, restructuring and insolvency senior associate at RPC. "However, the reality is if it doesn’t address the structural weaknesses in a particular business and if trading continues to decline it is only delaying administration or liquidation.”

“There is also a risk of CVAs being commoditised and turned into a product to be rolled out to retailers rather than each one being the bespoke and flexible solution that the legislation envisaged – and creditors consequently being less supportive of it as a process.”

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