Monsoon Accessorize still in critical condition despite CVA

2059
Monsoon Accessorize still in critical condition despite CVA
// Companies House files show Monsoon Accessorize is still in a critical condition
// Its future now depends on the £30m worth of loans founder Peter Simon has committed – of which £12m has been given
// Auditors believe covenants “are expected to be breached”

Monsoon Accessorize is not yet out of the woods after securing a restructuring deal, with its future now depending on the help it received from founder Peter Simon.

According to new accounts filed at Companies House this week, the fashion retailer remains in a critical condition despite the CVA it secured in July and Simon committing £30 million in loans to support the business.

Of that total, £12 million has been provided and Monsoon Accessorize said it may need to call on Simon for the remaining £18 million unsecured loan if trading conditions substantially worsen.

Auditors also said that management forecasts show targets are set to be missed, which means access to the £18 million to keep the business afloat may not be available.


READ MORE:


The report, signed by auditors at BDO, says covenants “are expected to be breached”.

Should that happen, it would be up to Simon to decide whether to hand the money over to the business to continue trading, renegotiate a new loan deal, or let the retailer collapse.

The auditors said the fact that Simon could choose not to hand over the £18 million facility if covenants are breached means “there can be no guarantee that funding sources will be available should they be needed”.

The accounts suggested that Monsoon Accessorize’s ability to continue as a “going concern” now hangs on its ability to trade using just the £12 million loan, or ensure it can access the extra funding.

Despite this, Monsoon Accessorize said it has performed ahead of forecasts for the first month of the new financial year – although it conceded that trading since 2018 has been “extremely difficult” as it battled “depressed consumer spending” in the UK.

Monsoon Accessorize also endured “slower growth in online sales” as like-for-like retail sales continued to decline in the most recent year.

The stark warning comes less than a month after the retailer started to implement its CVA, after British Land dropped a legal challenge against it last month.

Without the CVA, which involves landlords agreeing to rent cuts, Monsoon Accessorize’s owners said it could have collapsed.

Rent reductions will take place across 135 of Monsoon’s 258 stores in the UK.

Monsoon Accessorise plunged to a £22.5 million pre-tax loss for the year to August 2018, from a £2.2 million loss a year earlier.

Meanwhile, sales fell 4.6 per cent to £296.4 million for the year.

Click here to sign up to Retail Gazette’s free daily email newsletter