Wednesday 12 June 2019 7:06 am

Company Voluntary Anxiety: Retailers' favoured rescue tool under fire

SIR PHILIP Green’s fashion group Arcadia and department store chain Debenhams face renewed opposition to their restructuring efforts as the role of a controversial rescue mechanism comes under growing pressure.

The future of Green’s retail empire hangs in the balance after it emerged yesterday that shopping centre owner Intu plans to vote against the firm’s company voluntary arrangement (CVA) – a cost-cutting insolvency process – in a crunch vote today, putting the mogul’s fashion brands at risk of administration.

Separately, Sports Direct owner Mike Ashley ramped up the pressure on Debenhams by launching a legal challenge to the firm’s CVA, it was revealed yesterday. The move is understood to have the backing of at least one landlord.

CVAs, which aims to stave off the threat of administration, have been used by retailers to slash rents, close stores, and even reduce tax bills – in some cases triggering outrage from landlords and councils.


Intu’s plan to reject Arcadia’s CVA proposals, first reported yesterday by Sky News, throws the outcome of this afternoon’s vote into fresh doubt just a week after Green decided to postpone the ballot in a bid to win over the group’s landlords.

The vote on Arcadia, which includes brands such as Topshop and Dorothy Perkins, requires 75 per cent approval from creditors in order to get the green light. 

“From the landlord perspective, this is turning into a bit of a bluffing game,” said Richard Lim, an industry expert and chief executive of Retail Economics.

He told City A.M.: “Landlords cannot be seen to take this lying down. If they’re seen to accept every CVA, then obviously they put themselves in a very weak negotiating position. There has to be some point where they have to show their strength and try to 
negotiate on better terms.”

Meanwhile, the legal bid from Sports Direct, which had its 29 per cent stake in Debenhams wiped out after the firm fell into the hands of its lenders, marks Ashley’s latest move in a hard-fought tussle for control of the high street brand.

Sports Direct’s attempt to block the CVA came just hours before a 28-day window to appeal the insolvency process expired.

Debenhams executive chairman Terry Duddy branded the attempts as “an unnecessary distraction as we implement our restructuring plans”.


Ed Cooke, chief executive of Revo – a membership organisation for retail property – added: “Property owners, including pension funds, are the creditor group bearing most of the pain and in many cases are voting in favour of CVA proposals simply because there is no realistic alternative.”

Sports Direct declined to comment.

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