Creditors greenlight Paperchase’s CVA

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Paperchase CVA
// Paperchase has gained creditor approval for its CVA
// Will see rent reduced on almost 100 of its stores
// Another 70 stores will have its rent tied to individual store turnover
// Paperchase to decide after 3 months if a small number of loss-making stores should close down

Paperchase has obtained approval from creditors to push ahead with its CVA, which will see a radical shake-up of its rent obligations and the potential closure of a small number of stores.

The CVA, which was first launched earlier this month, will see the rent reduced at 100 of the stationery and greeting cards retailer’s stores.

Of these, 28 will pay 50 per cent rent for three months before Paperchase decides whether to close the shops or seek a rent-free period.

A small number of loss-making sites are expected to shut their doors as part of the process.

Meanwhile, 70 stores will have rent tied to the turnover of the individual stores.

Paperchase said this would better align its costs with footfall and trading.

The retailer’s remaining 45 stores will not be affected by the CVA scheme and the business will continue to operate as usual in all other aspects.

“The alignment of store rents to footfall and trading, alongside our long-term strategy to diversify and increase revenue from UK and international partnerships, and online sales, will lay the foundations for a successful future,” Duncan Gibson said.

The news comes after Paperchase’s parent company Primary Capital called in advisers from KPMG to explore its options, which included a sale to a new owner and store closures.

KPMG was called in after the retailer’s falling sales and footfall did not improve over the crucial Christmas trading period.

In addition, accounts filed at Companies House late last year saw Paperchase swing to a statutory pre-tax loss of £6.3 million for its fiscal year ending February 3, 2018.

Earnings also halved from £9 million to £4.5 million, but total sales increased 5.6 per cent year-on-year to £131.2 million, boosted by a 29.5 per cent surge in online sales and a 12.8 per cent increase in international sales.

Will Wright, restructuring partner at KPMG and joint supervisor of the CVA, said: “The engagement and buy-in of all stakeholders throughout this process has been vitally important in putting together an innovative CVA proposal which, following today’s approval, will allow Paperchase to move forward with a financial and operational restructuring plan.”

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