JD Sports backs off as JJB seeks to reach creditors' agreement
Sunday 13 February 2011
JD Sports is not pursuing its takeover talks for rival JJB Sports while it awaits the outcome of the latter's proposed rescue plan.
Wigan-based JJB issued details on Friday of its last-ditch rescue attempt with the closure of 45 stores through a company voluntary arrangement (CVA). The closures could be followed by another 50 over two years.
A CVA allows troubled retailers to close or change the rental terms on unprofitable stores.
JJB, which employs more than 6,000 people, and its adviser, KPMG, have begun negotiations with landlords to get approval for the plan.
Although it's the retailer's second CVA in two years – many landlords are thought to be minded to support JJB thanks to its good communication with them over the past year and its obvious dire circumstances. Another possible plus is its chief executive, Keith Jones, who is well respected among the landlords.
Landlords have been critical of retailers that they believe have "unnecessarily" asked for CVAs, some of which have failed due to lack of landlord support, including footwear chain Stylo in 2009.
JJB needs to win the support of 75 per cent of its unsecured creditors and 50 per cent of its shareholders for the CVA to avoid administration. Some experts suggest a pre-packaged administration could be on the cards if the CVA fails, and that is when JD Sports is likely to circle the carcass.
The CVA details, including slashing JJB's rent and moving to monthly rather than quarterly payments, as well as the closures, will be sent to creditors and shareholders at the end of the month. It has said just 150 stores of its 245-shop estate are "core to its future".
JJB has confirmed plans to raise £31.5m with the support of its two biggest shareholders, Harris Associates and Crystal Amber, and of the Bill & Melinda Gates Foundation. This fundraising will be followed by another, necessary to keep the company alive past April.
Elsewhere in retail, Tom Knight, the former JJB boss, is in the running to take the reins from Neil Gillis at outdoor clothing firm Blacks Leisure this week, while DIY chain Focus is close to selling five leases to a supermarket – either Asda or Tesco – as it raises money to fund a new store design.
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