// Debt-ridden landlords at risk of absorbing any unpaid rent from Clarks if CVA is approved
// Clarks’ CVA needs at least 75% of creditors to approve it, and landlords make up less than 25% of creditor votes
Clarks has reportedly been accused by its landlords of abusing insolvency processes as it pushes on with a CVA that features turnover-based and zero rental terms.
According to The Sunday Times, landlords are at risk of being compromised by Clark’s proposed CVA, as they account for less than 25 per cent of creditor votes. At least 75 per cent of creditors need to vote in favour of of the CVA for it to be approved.
The CVA, which was launched last week when Clarks secured a £100 million rescue deal with Hong Kong-based private equity firm LionRock Capital, would result in most of its 320 UK stores moving to turnover-based rent.
Meanwhile, 60 stores will move to zero rent and any outstanding rent would not need to be paid.
The Sunday Times said Clarks’ landlords have debts totalling around £160 million and were at risk of further debt if they have to absorb any unpaid rent.
“This abuse of CVAs forces property owners to absorb significant losses with little attempt to build a recovery strategy they can support as economic partners,” British Property Federation chief executive Melanie Leech said.
Clarks’ rescue deal with LionRock will see the latter gain a majority stake in the retailer while the founding Clarks family is demoted to a minority stake.
The deal was also done on the condition that the retailer’s proposed CVA is approved.