David Prosser: JJB running out of road as landlords lose faith in CVAs

Outlook Another day, another door slams in the face of JJB Sports, the troubled retailer. To avoid going into administration, JJB needs to persuade 75 per cent of its creditors, mostly landlords, to back a company voluntary arrangement (CVA) that would see it close as many as 95 shops and renegotiate rents on the remaining 150. Yesterday, after weeks of off-the-record sniping from landlords, one of them, Capital Shopping Centres (CSC), went public: it intends to vote against the CVA.

On its own, CSC is not material, since it is the landlord of just four stores. But its open rejection of JJB underlines just how close the CVA vote is likely to be. And the shopping centres group may also be drawing a line in the sand on behalf of landlords that have become increasingly unhappy about the frequency with which cash-strapped retailers are now resorting to CVAs – this is JJB's second in the space of two years.

As is always the case with these arrangements, JJB's landlords face a dilemma. Are they better offgetting it in the neck from thecompany for the next year or so – all the time in the knowledge that other creditors aren't sharing the pain – or should they force the company to call it a day now, gambling that they will be able to find new tenants?

The decision depends on how big a gamble landlords regard the second option – that will vary according to location. But they will be aware that JJB is also throwing the dice with this CVA – and that the odds are stacked against it.

JJB said its first CVA would secure its future. It has not. Is there any reason to think this time will be any different? Not really.

The problems are numerous. Probably the biggest is that up and down the country JJB is getting battered by Mike Ashley's Sports Direct. Mr Ashley may not be everyone's cup of tea, but his business has bought sports brands wisely, built up its chain of stores steadily and competed ever more aggressively on price.

As a result, JJB is out for the count. By contrast, its management teams have made a string of poor decisions over a period of several years, saddling the company with costs that will prove even more unsustainable in a business comprising only 150 stores. And though it got its most recent fund raising away thanks to its biggest shareholders, it freely admits it will need more money within months to remain a going concern.

JJB employs more than 6,000 staff and its closure would be a human tragedy. But property companies employ lots of people too and cannot go on being held over a barrel by tenants threatening CVA or closure forever. Then there are the staff of other retailers, who may find their employers sliding into the mire when faced with the unfair competitive advantage of a rival that is no longer paying a market rent.

These are difficult issues with which to wrestle – but one can understand why CSC is no longer prepared to play ball.