The company behind the ailing menswear retailer Suits You was saved from collapse yesterday after creditors approved an insolvency procedure that will allow it to slash its rental bill and keep 300 staff in their jobs.
Speciality Retail Group – which also operates the Racing Green and Young's brands – proposed that landlords of 42 loss-making stores will be offered 60 per cent of the full-rent for a period of 18 months after which they will close.
Yesterday, 98.1 per cent of creditors, mainly landlords, voted in favour of the company voluntary arrangement, which means that all of SRG's 71 stores will remain open. If the landlords wish to take on new tenants, they can do this by simply giving 45 days' notice.
The vote will have come as a huge relief to other retailers facing collapse as it signals that the property sector is still willing to back CVAs, a less severe option than an administration or liquidation.
Until JJB Sports completed a CVA in 2009, landlords had been reluctant to give them approval but they have recently been able to reach agreement with retailers, partly because of the reality of swaths of empty shops.
Paul Wilkinson, the co-founder and partner at Wilkinson Williams, the out-of-town retail property specialist, said: "JJB's CVA last year was pivotal because it was seen by other retailers as a route they could take.
"The CVA is seen as the more elegant route and gentler way to restructure a business, compared to an administration where people tend to be quite ruthless about the parts of the company they keep. If a company is on the brink of administration a CVA is one of the only options open to them."
Peter Lucas, SRG's chairman, said: "The landlords have shown incredible flexibility in voting in favour of our restructuring plans and we are appreciative that they have met us half way in securing SRG's future."
KPMG, the supervisor of SRG's CVA, has helped retailers including JJB, Focus DIY and Blacks Leisure complete the procedure over the past year.
Richard Fleming, the UK head of restructuring at KPMG, said: "The approval of SRG's CVA will come as a huge relief to the company and its stakeholders, particularly its 300 staff. If the creditors had not supported the company's turnaround plans, it undoubtedly would have faced administration."
SRG's designer outlet stores have performed ahead of its struggling high street stores recently. But some stable retailers, such as the entertainment retailer HMV, have complained that CVA do not leave behind a level playing field because struggling store groups gain a financial advantage by dramatically reducing their property costs. Blacks Leisure, which operates the Blacks and Millets fascias, riled the British Property Federation this year by announcing plans to open new stores in areas it had exited after completing a CVA, which enabled it to ditch 87 shops, in November.
More CVAs are expected this year. Mr Wilkinson said: "There are likely to be more CVAs in the sector this year because there are lots of struggling retailers whose rents are too high."
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