A group of insolvency professionals has warned that the next due date for rental payments, later this week, could see a number of retailers falling into administration.
The so-called ‘quarter day’, which falls on June 24th 2011 for this three-month period, has been the tipping point for several retailers in recent years according to insolvency experts R3.
On the most recent due date for rents in March 2011, The Officer’s Club fell into administration for the second time because it could not meet the payments on its properties, and R3 warns that other struggling retailers could find themselves in a similar position this Friday.
Frances Coulson, President of R3, commented: “Trading conditions have clearly been extremely tough for many retailers since 2008, and after hanging on through the worst of the recession, the heavy snow that we all endured through the winter could well turn out to be the straw that breaks the camel’s back.
“A lot of firms used the last of their resources to make it past the March payment date. With the latest figures showing a fall in retail sales, it is clear that there has been little improvement over the last three months.
“We could well see another swathe of retailers reaching the end of the road when the quarterly rental payments fall due.”
With retail sales reported by the Office for National Statistics to have declined again in May after April’s brief rise, pressure will be on many high street stores to cover their overheads.
Dialogue may be the key to survival for desperate traders however and Richard Curtin, Special Counsel at law firm Faegre & Benson, has urged distressed businesses to talk with their landlords and lenders.
Earlier this year JJB Sports showed what extensive discussions with creditors could achieve by avoiding administration by passing a company voluntary arrangement.
“I agree that retailers are certainly facing a squeeze, and the quarter rent date this Friday is significant,” Curtin said.
“However, in this day and age landlords do behave responsibly and reasonably, and will engage in dialogue.
“The worst thing to do is to ignore the problem. Retail figures are down, so the next week will be interesting.”