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JJB Sports sets out CVA proposal.

JJB Sports has set out full details for its restructuring and the proposed cancellation of its listing on the London Stock Exchange's main market and admission to trading on AIM.


JJB Sports sets out CVA proposal.

JJB Sports has set out full details for its restructuring and the proposed cancellation of its listing on the London Stock Exchange's main market and admission to trading on AIM.

JJB says the company voluntary arrangement proposal will enable it to carry out a fundamental restructuring of its property portfolio which must be carried out as part of implementing the group's revised business plan.

The company is planning to close 43 stores (41 of which are still trading) "to restore the viability of the group's business model". The stores would all close by April 24 next year.

It will also allow it to place a further 46 stores under review for two years, with an option to close them if their performance does not improve. It is proposing to pay landlords just half of the rent they are owed, with an extra 5% to on top to cover dilapidations.

JJB said that the CVA proposals "demonstrably gives landlords of compromised stores a far greater estimated return than is likely if JJB (and subsidiary Blane Leisure) are placed into administration". It is also proposing to spread rent payments over a monthly, rather than a quarterly, basis.

It is also offering performance-based payments of between £2.5m-£7.5m to landlords as an incentive to sign up to the CVA which will be paid by April 24 2013 (or earlier, if a takeover offer emerges).

JJB chairman, Mike McTighe, said: "JJB's restructuring plan is on track. Last week we completed the first capital raising to provide short term finance for the group and delivered our revised business plan to Bank of Scotland.

"Today, we are laying out the full terms of our CVA proposals and preparing the way for creditor and shareholder meetings later this month.

"In formulating these CVA proposals we have talked to our landlords and listened to their views. As a result, we are offering them a possible share in the value of a restructured JJB of up to £7.5 million, payable in two years' time.

"Before the shareholder and creditor meetings, we intend to release details of the anticipated funding requirements of a restructured JJB and our new business plan, together with the key terms of our second capital raising that will deliver the longer-term financing required to enable the group to move forwards on a far sounder footing.

"There remains much to be done, but we have achieved some significant success in recent weeks, and are hugely grateful to all our key stakeholders who have shown us so much support. With their continued backing we remain confident about the future of this business."

Commenting on the company voluntary arrangement (CVA) proposal in today's announcement by JJB, Richard Fleming, UK Head of Restructuring at KPMG, and proposed 'supervisor' of the CVA, said: “The CVA proposed by JJB today gives the company a chance to avoid administration and carry out a fundamental restructuring of its property portfolio.  A CVA must always offer a better return to creditors than administration and in the case of JJB we estimate the return to compromised landlords to be within a range of 24.6p to 29.2p in the £1 versus 1.1p in the £1 in administration.”

Fleming went on to say: “Clearly JJB has already been through one CVA and landlords will be keen to understand why they should sign up to a second.  The reduced equivalent monthly rent of 55% is similar to the last CVA JJB agreed and - of great importance to the landlords - the company will also continue to pay rates.  However, as we have sought to develop the CVA model over the past two years with the input of companies and their creditors, we believe we have improved the terms.  Accordingly, we have added in a so-called ‘claw back’ clause which allows the compromised landlords to share in the turnaround of the business.  Moreover, landlords will also have the option of taking back compromised stores if it is in their financial interests to do so.

“While CVAs have come in for criticism, we believe they offer a more socially responsible alternative for companies in distress.  They must always offer a better return to creditors than administration but, beyond this, they keep more of a business’ operations intact and more of the workforce in jobs.  With the ever-increasing issue of empty high street stores - as much as 20%* in Yorkshire - and current UK unemployment at nearly 8%**, the importance of developing insolvency tools to improve the position for all stakeholders has never been more crucial.”

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