CVAs result in 1000 store closures

// CVAs have led to almost 1,000 stores closures since 2017
// Numbers of CVAs doubled in that time
// After Arcadia’s CVA was voted in last week, Monsoon Accessorize plans to launch this week

New research has revealed the controversial CVA tactic currently favoured by retailers has led to the closure of almost a thousand stores in the last two years alone.

Property group Colliers International found retailers including Carpetright, Mothercare and Homebase have contributed to a total 954 stores shut under the premise of CVAs since the start of 2017.

Under UK insolvency law an insolvent company can enter into a CVA with its business creditors regarding repayment of all, or part of its corporate debts.

However, there has been a huge rise in retailers using CVAs as a way to renegotiate rents with landlords, with the numbers of CVAs doubling since 2017.

Last week Arcadia won the backing of its landlords for a restructuring of its retail property which will see the immediate closure of 23 of its stores and rent cuts of up to 50 per cent on almost 200 other shops. 

The Topshop and Topman owner came under criticism from many of its landlords for using an insolvency tool to reduce its rent liabilities.

The day after Arcadia won approval from its creditors, Sir Philip Green argued the group was nowhere near collapse.

“It didn’t come close to collapse. We won the vote. It was a legitimate vote, and it was won,” Green told the BBC last Thursday.

Meanwhile Monsoon Accessorize is thought to be the next retailer to launch a CVA.

 Founder Peter Simon will face fresh demands from landlords to alter the terms of his multi-million pound support package and have asked the businessman to provide more than £30 million of rescue funding in the form of equity, rather than secured loans.

Six landlords, including British Land and Hammerson, have told Simon that they are less likely to back his his rescue plan unless he agrees to the change.

“CVAs should not be used as a tool for financial engineering and a way to walk away from freely entered-into legal contracts. Their use must only be as a last resort,” said Colliers co-head of retail Paul Souber.

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