JJB launches life-saving rent cut plan

STRUGGLING sportswear retailer JJB Sports is offering its landlords a share of up to £7.5m if they back its rescue plan.

The company, in which America’s richest man Bill Gates holds a 5.5 per cent stake set out the details of its second company voluntary arrangement (CVA) in as many years.

It needs creditors, including landlords, and shareholders to back the plan or it will likely go into administration, threatening 6,300 jobs.

JJB wants to close 43 stores by April 2012 and have the option of closing a further 46 stores by April 2013, pay 50 per cent less rent on these 89 properties prior to closure and pay rent monthly rather than quarterly on all stores.

It would retain a core group of 150 stores. The CVA terms provide for an additional payment to landlords of between £2.5m and £7.5m, to be paid in cash or JJB shares in April 2013.

“In formulating these CVA proposals we have talked to our landlords and listened to their views. As a result, we are offering them a possible share in the value of a restructured JJB,” said chairman Mike McTighe. Prior to yesterday’s update shares in JJB had lost 89 per cent of their value over the last year.

It was also revealed yesterday that activist investor Crystal Amber is receiving a £580,000 payment in shares for bringing in new investor Investec to JJB. Investec now has a 22 per cent stake in the retailer.

JJB’s CVA proposals need the backing of 75 per cent of unsecured creditors and 50 per cent of shareholders at meetings set for 22 March.

There has been landlord hostility to its plan, with some arguing that they are being unfairly treated.

Last month JJB raised £31.5m in a share sale that represented a first step towards survival.

RICHARD FLEMING
KPMG

HEAD of restructuring at KPMG Richard Fleming is advising JJB on the company voluntary agreement (CVA) aimed at stopping the beleaguered company plunging into administration.

He has been at KPMG since 2003 and has steered a number of companies through choppy financial waters including Blacks Leisure. Fleming and his team successfully pulled off the first JJB CVA in April 2009 and he was upbeat about the chance of the latest version being approved by creditors. He said: “Whichever way you cut it this is the best option available. If the company goes into administration the creditors will receive less. I think that is clear.”

He said that, unlike with administration, the company’s shares continue trading during the negotiations which makes CVAs a delicate process. He added: "While CVAs have come in for criticism, we believe they offer a more socially responsible alternative for companies in distress.”

He added: “They keep more of a business’s operations intact and more of the workforce in jobs.”