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| BHS faces crucial vote on its future | BHS faces crucial vote on its future |
| (about 5 hours later) | |
| It is crunch time for one of the UK's best-known High Street names, the troubled department store, British Home Stores (BHS). | It is crunch time for one of the UK's best-known High Street names, the troubled department store, British Home Stores (BHS). |
| Its creditors will vote on Wednesday on a deal it desperately needs to cut the rent bill for its 164 UK stores. | Its creditors will vote on Wednesday on a deal it desperately needs to cut the rent bill for its 164 UK stores. |
| The loss-making retailer currently has debts of over £1.3bn, including a pensions deficit of £571m. | The loss-making retailer currently has debts of over £1.3bn, including a pensions deficit of £571m. |
| BHS was bought by billionaire Sir Philip Green for £200m in 2000, but he sold it last year for just £1. | BHS was bought by billionaire Sir Philip Green for £200m in 2000, but he sold it last year for just £1. |
| It is now owned by Retail Acquisitions, a consortium of financiers, lawyers and accountants. | It is now owned by Retail Acquisitions, a consortium of financiers, lawyers and accountants. |
| BHS - which has been loss-making for seven years - wants its creditors to agree to a Company Voluntary Arrangement (CVA). | BHS - which has been loss-making for seven years - wants its creditors to agree to a Company Voluntary Arrangement (CVA). |
| In effect, this is a compromise financial deal which depends on them accepting reduced rents. | In effect, this is a compromise financial deal which depends on them accepting reduced rents. |
| Otherwise BHS is likely to end up in administration, placing the jobs of its 10,000 workers at risk. | Otherwise BHS is likely to end up in administration, placing the jobs of its 10,000 workers at risk. |
| Cutting rents | Cutting rents |
| BHS says a deal to cut its rental costs is vital in order to turn around the loss-making business. | BHS says a deal to cut its rental costs is vital in order to turn around the loss-making business. |
| "Although a difficult process to go through, this sets in motion the comprehensive updated turnaround plan," says its chief executive, Darren Topp. | "Although a difficult process to go through, this sets in motion the comprehensive updated turnaround plan," says its chief executive, Darren Topp. |
| The retailer has divided its stores into three groups - depending on their profitability. | The retailer has divided its stores into three groups - depending on their profitability. |
| For 77 stores the rents it pays will remain unchanged, while for 47 stores BHS is "seeking a reduction in rent to market levels". | For 77 stores the rents it pays will remain unchanged, while for 47 stores BHS is "seeking a reduction in rent to market levels". |
| Its least-profitable 40 stores will continue to trade for a minimum period of 10 months while talks go ahead "to reduce rents substantially", says the retailer. | Its least-profitable 40 stores will continue to trade for a minimum period of 10 months while talks go ahead "to reduce rents substantially", says the retailer. |
| At Wednesday's meeting BHS needs 50% of its landlords and 75% of its creditors to agree to the deal. | At Wednesday's meeting BHS needs 50% of its landlords and 75% of its creditors to agree to the deal. |
| However, Julie Palmer, retail analyst at insolvency experts Begbies Traynor, says BHS is confident it will get an agreement. | However, Julie Palmer, retail analyst at insolvency experts Begbies Traynor, says BHS is confident it will get an agreement. |
| "It is passing the buck essentially to the landlords - with promise of a reduced but continued rental income for the next 10 months." | "It is passing the buck essentially to the landlords - with promise of a reduced but continued rental income for the next 10 months." |
| Mr Topp said a deal would give BHS "a secure financial footing from which to grow and deliver sustainable profitability". | Mr Topp said a deal would give BHS "a secure financial footing from which to grow and deliver sustainable profitability". |
| BHS is also in talks to address its pension deficits with the Pension Protection Fund, the government-supported rescue agency, as well as the Pensions Regulator and the BHS pension trustees. | BHS is also in talks to address its pension deficits with the Pension Protection Fund, the government-supported rescue agency, as well as the Pensions Regulator and the BHS pension trustees. |
| BHS insists that it continues to meet its pension payment obligations. | BHS insists that it continues to meet its pension payment obligations. |
| But in BHS's CVA submission, the retailer's directors are clearly hoping that the two pension schemes will be transferred into the PPF and that the company would have no further liability to fund it. | But in BHS's CVA submission, the retailer's directors are clearly hoping that the two pension schemes will be transferred into the PPF and that the company would have no further liability to fund it. |
| Yet even if landlords agree a deal, BHS warns that it needs extra funding to trade beyond 25 March and it is trying to raise £100m. | Yet even if landlords agree a deal, BHS warns that it needs extra funding to trade beyond 25 March and it is trying to raise £100m. |
| Analysis: Simon Jack, BBC business editor | |
| The Pension Protection Fund is entitled to vote today but, I have learned, will NOT. | |
| Because it is by far the biggest creditor, its vote would make the other creditors votes irrelevant and so it is allowing the company and the landlords to sort out their issues first. | |
| However, it has secured to right to call in its debt in six months' time if it's not happy with the way the pension liabilities are dealt with. | |
| That would bankrupt the company and is essentially a sword of Damacles hanging over the company. | |
| That will focus minds at the company and at the pension regulator who is in negotiations with former owner Sir Philip Green's Arcadia over making a contribution towards filling the hole. | |
| BHS may win the day today but the pension question will have to be answered if the company is to survive. | |
| BHS pension hole 'may swallow the firm' | |
| 'Tired and old-fashioned' | 'Tired and old-fashioned' |
| Crucially a deal does not mean that BHS's long term future is secured, says Julie Palmer. | Crucially a deal does not mean that BHS's long term future is secured, says Julie Palmer. |
| "It buys them time, but the fundamental issues still remain." | "It buys them time, but the fundamental issues still remain." |
| With increasing competition from retailers like Primark and the internet, the challenge for BHS is to bring in shoppers, she says. | With increasing competition from retailers like Primark and the internet, the challenge for BHS is to bring in shoppers, she says. |
| "What do BHS do, that nobody else does? If you look at homecare, Next do that better; and if you look at clothing, then Marks and Spencer do it better." | "What do BHS do, that nobody else does? If you look at homecare, Next do that better; and if you look at clothing, then Marks and Spencer do it better." |
| The problem, says Ms Palmer, is that the BHS brand "is tired and old-fashioned and has not kept pace with the times". | The problem, says Ms Palmer, is that the BHS brand "is tired and old-fashioned and has not kept pace with the times". |
| If BHS does eventually disappear, it would join its long-term rival Woolworths in failing to keep pace with a changing retail sector. | If BHS does eventually disappear, it would join its long-term rival Woolworths in failing to keep pace with a changing retail sector. |
| BHS: A history of a High Street stalwart |