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Very few company voluntary arrangements are rejected by landlords: No matter how onerous the terms of a CVA may look, the alternative, the possibility of pushing a retailer into insolvency, is too much to countenance. But maybe not this time.
A group of shopping centre owners are preparing to reject the CVA proposal being put forward by New Look, the Mail of Sunday reported. Up to 10 landlords have said they will vote against the plan in its current form, the paper said, which could mean it does not receive approval when creditors including landlords vote on it on 15 September.
The paper quotes an unnamed source as saying this would make insolvency of the business probable, which could lead to the closure of 450 stores and more than 10,000 job losses, unless a buyer were to be found.
Under the CVA proposal, its second in the past three years, New Look wants to move to turnover rent on some stores and reduce its rent bill at others. But Retail Week reported that landlords are unhappy with the company’s unwillingness to provide data on the turnover of individual stores, to allow that rental level to be set.
The British Property Federation has been fiercely critical of New Look’s CVA proposal.
“While New Look and Deloitte engaged with us and this resulted in some changes to the proposal, this still fails to meet our best practice standards for CVAs and contains terms that property owners will object to,” BPF chief executive Melanie Leech said.
“CVAs should not be about permanently ripping up leases — they are supposed to be a temporary measure, as part of a wider rescue plan, to get a business back onto its feet. Property owners absorb significant losses during a CVA to support a business’ future, and in return expect the support measures within a CVA to come to an end upon termination of the CVA.
“New Look is using this CVA to permanently re-write its leases, this proposal is not about a time-limited rescue plan. Property owners are increasingly supporting turnover-based rent models underpinned by collaboration and transparency, but CVAs should not become a mechanism to enforce this.”
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