Homebase faces make-or-break vote on rescue plan

Up to 11,500 jobs at risk if the retailer fails to convince creditors on CVA proposals

The DIY chain is hoping to cut costs by seeking reduced rents (EPA)

Struggling DIY chain Homebase is set to learn its fate after creditors vote on a proposed rescue deal aimed at keeping the retailer afloat on Friday.

Earlier this month, the company announced it was closing 42 stores across the UK and Ireland due to a significant decline in sales and profitability over the last two years.

The firm said it had “faced an extremely challenging retail trading environment reflecting weak consumer confidence and reduced consumer spending”.

The closures are part of a company voluntary arrangement that Homebase will also use to seek lower rents from landlords as it tries to cut costs.

Creditors will vote on the proposals on Friday, but some landlords are said to be planning to vote against the CVA.

Up to 1,500 jobs are at risk from the branch closures already outlined, but 11,500 roles are hanging in the balance ahead of the crunch vote on the company’s future.

In order to pass, the CVA needs to be approved by more than 75 per cent of creditors and 50 per cent of shareholders. If the CVA does not gain creditors’ approval, it is likely that Homebase will fall into administration.

Lance Ashworth QC, barrister at Serle Court, said CVAs have “faced fierce resistance from landlords for a number of years, who have taken the view that they are being used by retailers seeking to get off the hook in terms of their property commitments”.

Landlords recently voted against CVA proposals by House of Fraser, which subsequently collapsed into administration. However, they are now in negotiations with House of Fraser’s new owner, Mike Ashley, who has said any job losses will be the fault of “greedy landlords”.

Commenting on the Homebase vote, Mr Ashworth said: “Landlords feel that they are being asked to bear a disproportionate amount of the pain being suffered.

“The danger that the landlords face is that if the CVA proposals are voted down, it seems likely Homebase will go into administration and the landlords may well be left with empty properties within a very short space of time and the prospect of no rent being received. Unless of course, Sports Direct plan to move into this market too.”

Australian company Wesfarmers sold the loss-making retailer to restructuring specialist Hilco Capital for just £1 in May, two years after buying it for £340m.

Wesfarmers had planned to rebrand Homebase as Bunnings, the name of the group’s DIY chain in Australia, but said it would cost too much to turn the UK business around.

Describing the purchase as “disappointing”, Wesfarmers boss Rob Scott said: “Problems arising from poor execution post-acquisition being compounded by a deterioration in the macro environment and retail sector in the UK.”