Struggling sports retailer JJB Sports has confirmed that 99.94 per cent of its creditors backed its company voluntary agreement (CVA) during a vote this morning.
Over 86,283,159 votes from landlords and other creditors backed the move that will see a possible 89 stores close in two years and rents on some properties cut by 50 per cent.
In a second ballot of shareholders held later on today almost everyone voted for the proposal, with only 2,847 against and 12,130 abstaining in a poll of 86,362,445.
Mike McTighe, Chairman of JJB, commented: “We are very grateful for the overwhelming support that we have received from our stakeholders today and the confidence that they have placed in JJB’s management to pursue a turnaround of the business over the coming years.
“Our focus is now on completing the capital raising to provide the necessary working capital to fund the ongoing implementation of our turnaround plan.”
The British Property Federation (BPF) has applauded the decision by shareholders and creditors to keep the company going, and has pointed to the 6,100 jobs that have been saved because of the deal.
A ‘clawback’ mechanism in the CVA will award landlords with sweetner payments at a later date if the company can turn itself around and the BPF thinks this was vital to the deal being agreed.
KPMG has estimated that creditors are likely to receive between 25p and 29.2p in the pound they are owed under the CVA, which compares with just 1p if the company falls into administration.
Liz Peace, CEO of BPF, said: “Landlords treat each CVA on its merits and JJB is a business undergoing significant changes.
“This is not an opportunistic dumping of stores, rather a genuine attempt at rescuing the business, and should not be seen as a green light for other retailers to restructure their portfolios via a CVA at the expense of both landlords and their competitors.”
That had been a worry for some creditors during the negotiations and with insolvencies likely to rise towards the end of this year others may try to replicate JJB’s deal.
As Philip Duffy, Partner at law firm MCR, explained: “What the market should be afraid of is the incorrect use of CVAs where their use is purely a means of putting off payments to suppliers whilst the business issues i.e. a loss making business, that have caused the cash problems are still there.”
Keeping creditors involved in the discussions seems to have been key to today’s agreement and with national vacancy rates so high already you can understand landlords wanting to keep as many stores open as possible.
Scottish Widows Investment Partnership (SWIP) has JJB as a tenant at 11 of its locations and supported the CVA to preserve its long-running and healthy relationship with the retailer.
Malcolm Naish, Director of Real Estate at SWIP, added: “We feel that the company has been open and honest with us about its situation.
“The majority of our locations will continue to trade and we remain confident that any stores that become void will present us with opportunities to add value for our clients in the near future through re-lettings or extensions for adjacent retailers.”