BHS threatens store closures as it looks to cut rents with CVA
Acquired by Retail Acquisitions from Sir Philip Green’s Arcadia Group last year, the company is attempting to secure a Company Voluntary Arrangement as it looks to turn the business around. BHS needs to secure at least 75% creditor approval for the CVA.
Commenting on the proposed CVA for BHS Limited and BHS Properties, Will Wright, restructuring partner at KPMG and proposed 'supervisor' of the CVA, said: “For almost 90 years, BHS has been one of the most iconic brands on the UK high street, but in recent years has seen its profitability decline as it has sought to respond to changing customer behaviours, increased competition and the rise in omni-channel retailing.
“Today’s CVA proposals are one facet of a wider turnaround plan, and specifically tackle one of the business’ largest fixed costs, the onerous lease arrangements across its UK-wide store portfolio.”
The CVA proposal divides BHS’s 164 store portfolio into three main categories, based on the commercial viability and strategic importance of each site.
Brian Green, restructuring partner at KPMG and second proposed supervisor of the CVA, said: “While the company’s store estate is located across favourable retail locations, a number of these leases are unsustainable, predicated on terms which were originally negotiated some decades ago. With the support of its lenders, shareholders and landlords, the company will be able to reshape its debt and operational structure to a model more suited to today’s multi-channel retail environment.”
Green explained that none of the BHS stores will close on day one and suppliers will continue to be paid on time and in full. The landlords of a total of 77 of the most viable stores will be retained at current rents which will be paid monthly as opposed to quarterly for three years. A further 47 stores have been identified as being viable at a reduced equivalent monthly rent of either 75% or 50%.
He added: “The remaining 40 stores will continue to trade for a period of a minimum of 10 months whilst negotiations with landlords are undertaken to reduce the rents substantially. Where rent reductions are achieved, these stores will remain open. It is hoped that the store closure number will be kept to a minimum.”
The creditors will vote on the CVA on 23 March. KPMG said it will spend the next three weeks in talks with creditors to ensure they understand the full details of the proposal.
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