Philip Green's Arcadia avoids administration as rescue deal backed

Guardian Web |

Sir Philip Green’s Topshop to Burton retail empire has staved off collapse after winning the backing of creditors for a rescue plan that involves the closure of 50 stores.

Landlords of Arcadia Group’s 570 UK standalone stores, which are also home to Dorothy Perkins, Topman, Wallis, Evans, Outfit and Miss Selfridge, approved the plan on Wednesday, averting a slump into administration that would have put 18,000 jobs at risk.

Ian Grabiner, chief executive of Arcadia Group, said: “After many months of engaging with all our key stakeholders, taking on board their feedback, and sharing our turnaround plans, the future of Arcadia, our thousands of colleagues, and our extensive supplier base is now on a much firmer footing.

“I am confident about the future of Arcadia and our ability to provide our customers with the very best multi-channel experience, deliver the fashion trends that they demand and ultimately inspire a renewed loyalty to our brands that will support the long-term growth of our business.

The complex deal required 75% of all creditors and at least half of landlords to vote in favour of seven company voluntary arrangements (CVAs), which are insolvency procedures that have been used by a string of high street names to shut stores, including New Look and Mothercare.

Green sought to win over landlords with an initial promise togivethem a 20% stake in the business and invest an extra £50m in the stores as part of a £135m turnaround plan intended to help Arcadia compete with rivals such as Asos, Zara and H&M.

That was not enough for some landlords, however. This forced Arcadia to adjourn voting on the restructure last week to try to win over detractors. Late last week the Green family offered to put up about £9.5m a year over three years, so that rent cuts for landlords would be reduced to 25%-50% from the 30%-70% previously planned. That move finally won over creditors in Wednesday’s vote.

The CVAs, which involve at least 23 store closures and rent cuts on almost 200 stores, are part of a wider restructure in which about 25 more UK stores will close as the property arms of Miss Selfridge and Evans are put into administration. The group is also closing its 11 US Topshop stores and has closed all but one of its remaining Australian stores in recent weeks.

Green and Arcadia have won support for the restructure from the Pensions Regulator, the group’s pension fund trustees and the pension protection fund, an industry-backed lifeboat for collapsed companies’ savings schemes.

The fund had a major influence on the outcome of the vote because of the scale of its deficit, which could rise to £750m.

Arcadia launched the CVA process last month after saying it faced “significant financial difficulties” amid “challenging market conditions”.

It warned that if the restructure deals were not approved the company was “highly likely, either immediately or after a short time period, to enter into insolvent administration or liquidation”.

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