Rent day for retailers piles on pressure at troubled chains

Quarterly rent demands arrive as retailers' problems mount up
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The Independent Online

Struggling retailers face a multimillion-pound rental payment on Wednesday that could lead to a fresh wave of administrations in the sector unless they are able to secure last-minute rescue deals.

JJB Sports, the ailing sportswear retailer, and Jessops, the debt-laden camera retailer, both face a crucial week of discussions with their banks. Other retailers under pressure include Allied Carpets, the flooring specialist, and Robert Dyas, the hardware chain, though both have defied gravity for several years, said restructuring experts.

On Wednesday, many sickly retailers have to fork out huge sums to pay their rent for the next three months, despite facing a string of other financial ailments, such as breaches of banking covenants, the withdrawal of credit insurance and falling profit margins. A large number of retailers have already managed to secure a move to monthly rental payments, but some landlords have refused to offer stores this concession.

At JJB, a deal to sell its chain of fitness clubs for £70m to Dave Whelan, the company's founder, is being pursued, but if a sale is not completed this week, the sports equipment retailer could be forced to file for administration, putting 11,800 jobs at risk.

It emerged yesterday that Mike Ashley, the owner of rival retailer Sports Direct, is trying to scupper the sale to Mr Whelan, who is in exclusive talks with JJB. If the sale goes through, JJB will use the proceeds to pay down its £60m of debt and strengthen troubled relationships with suppliers.

On the day before the 25 March rent day, JJB's standstill agreement over the repayment of debt with its banks expires, though it may yet again seek a further extension. Even if JJB does sell its gym chain, it still plans to put up to 40 shops into a company voluntary arrangement to cut rental liabilities.

Meanwhile, on Tuesday, Jessops, which is labouring under debts of near-£60m, will hold an extraordinary general meeting following its annual meeting. Last week, the photography specialist said the EGM had been convened for the purposes of considering "whether any, and if so what, steps should be taken to deal with the situation in regards to the fact that the net assets of the company are less than half of its called-up share capital".

Jessops has hired Alan Fort, the former chief executive of the defunct furniture retailer Courts, as its chief restructuring officer.

Elsewhere, Allied Carpets, which has been up for sale since before Christmas, faces a second-quarter rental payment of about £8m on Wednesday. The retailer appointed Lazard, the investment bank, to handle the sale, but it is unclear if any parties are still interested in bidding for the loss- making 217-store chain.

While Merchant Equity Partners, the private equity firm and former owner of MFI, the collapsed retailer, and Hilco, the restructuring specialist, are thought to have initially expressed an interest in Allied Carpets, it is unclear if they are still in the running. Market sources said that Allied Carpets' French owner, Tapis Saint-Maclou, has pumped about £15m of working capital into the chain over recent months and that more funding may be required before the end of this month.

In 2007, Allied Carpets made an operating loss of £6.8m, on total sales of £206.9m. According to Retail Knowledge Bank, the retailer has not made an operating profit for the past eight years. Allied Carpets could not be reached for comment.

Speculation is also mounting about the financial stability of Robert Dyas, the 105-store hardware retailer, which is owned by Change Capital, the private equity firm created by Luc Vandevelde, the former Marks & Spencer chairman.

Around the 25 December rent day, the discount fashion chain Officers Club and the tea specialist Whittard of Chelsea were bought out of pre-pack administration, while Zavvi, the entertainment retailer, collapsed.

Hard-up high street: Four in the firing line

*JJB Sports hopes a £70m deal to sell its chain of gyms will be enough to solve financial pressures within the group. However, JJB's favoured bidder, its founder Dave Whelan, has not yet completed the deal, and now faces pressure from rival Sports Direct. JJB must pay some of its rent bills on Wednesday.

*Allied Carpets has been up for sale since Christmas, but buyers are being asked to consider the business during very difficult trading conditions. Allied Carpets was struggling even before the housing market ground to a halt, reducing demand for its floor coverings. Rent is due on Wednesday.

*Jessops faces an emergency general meeting of shareholders as it too faces rent bills. The camera specialist hopes a restructuring expert, installed at the behest of its banker, can turn its fortunes around.

*Robert Dyas is the latest retailer to fall prey to speculation about its financial health, and like the others, rent on its stores is now falling due.