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Arcadia: Thousands of jobs saved as landlords back rescue plan - business live Arcadia: Thousands of jobs saved as landlords back rescue plan - business live
(32 minutes later)
Stephanie White, Associate and real estate expert at Stevens & Bolton LLP, points out that Arcadia could face a legal challenge from unhappy creditors.
Here’s her take on today’s agreement:
“Landlords struck a compromise to avoid the group passing into the hands of the Administrators, which could be catastrophic for the high street.
“Landlords pushed the Arcadia group to come up with a better deal and they were right to do that because Arcadia has come up with a proposal that landlords felt able to give their backing.
“However, Arcadia would be wise to keep the champagne on ice until the period to mount a legal challenge has passed. The deal did not have unanimous support and there is still a risk that the landlords who did not back the deal could find grounds to challenge it.”
Frank Field, a long-time critic of Philip Green, is calling on the retail chief to give “binding promises” that Arcadia’s pensions will be fully guaranteed.
Parliament’s Work and Pensions Committee (which Field chairs) has written to the Pensions Regulator seeking “further clarity and assurances” over the cash and assets that will be available to plug Arcadia’s massive pension scheme deficit.
Field explains:
“Now that, thankfully, Arcadia’s life has been extended, the Committee will try to ensure that the Pensions Regulator gets an effective programme in place to ensure that Arcadia staff receive in full the pensions that Sir Philip and Lady Green have promised them.
Last week the Greens agreed to put £25m more into the pensions pot, having been asked to cough up £50m to fix its black hole.
Sir Philip Green agrees to put £25m into Arcadia pension fund
Intu, one of Arcadia’s biggest landlords, has heavily criticised today’s decision after being outvoted by other creditors.
Intu says the CVA gives Arcadia an unfair advantage against other retailers, through a lower rent bill.
.@intu - one of big retail landlords, forced to accept lower rent:"terms of Arcadia CVA are unfair to our full rent paying tenants: not in the interests of any other stakeholders, including intu shareholders and 130k people whose jobs rely on success of our shopping centres"
Rating agency Moody’s say today’s rescue deal undermines the financial health of UK property firms.
Ramzi Kattan, a vice president at Moody’s explains:
“Arcadia’s landlords have approved company voluntary arrangements that will close stores and slash rents.
This is credit negative for retail property owners, who face continued weak operating performance, with declining footfall and retail sales, and downward pressure on rents.”
That explains why landlords rejected the original CVA a week ago, forcing Philip Green to sweeten the deal (with smaller rent cuts).
Ultimately, landlords couldn’t face the prospect of shutting hundreds of Arcadia stores across the UK, says Joanne Fearnley, partner and a commercial property expert at law firm Gordons.Ultimately, landlords couldn’t face the prospect of shutting hundreds of Arcadia stores across the UK, says Joanne Fearnley, partner and a commercial property expert at law firm Gordons.
“Ultimately, the risk to the further demise of the High Street and the loss of big names - Topshop, Burton, Miss Selfridge and Dorothy Perkins - was too much of a bitter pill for landlords to swallow and they have settled for large rent reductions instead.“Ultimately, the risk to the further demise of the High Street and the loss of big names - Topshop, Burton, Miss Selfridge and Dorothy Perkins - was too much of a bitter pill for landlords to swallow and they have settled for large rent reductions instead.
This means 23 stores will close and the rest of Arcadia’s 500 plus stores will keep trading. The threat of administration has been lifted and jobs saved…for now.This means 23 stores will close and the rest of Arcadia’s 500 plus stores will keep trading. The threat of administration has been lifted and jobs saved…for now.
But....she also warns that Arcadia’s long-term future is still unclear:But....she also warns that Arcadia’s long-term future is still unclear:
“As we are seeing with other retailers who have followed the same route, time will tell whether or not this is a temporary saving or whether the dent to the confidence of landlords will result in them putting in place contingency plans on the prime locations in particular, so that the demise of Arcadia becomes inevitable over time.”“As we are seeing with other retailers who have followed the same route, time will tell whether or not this is a temporary saving or whether the dent to the confidence of landlords will result in them putting in place contingency plans on the prime locations in particular, so that the demise of Arcadia becomes inevitable over time.”
Reaction is flooding in:Reaction is flooding in:
Chloe Collins at GlobalData ‘‘Although Arcadia’s CVA has been approved, it is unsurprising it faced backlash from some landlords who have doubts about the retailer’s future .. Topshop and Topman still have a strong following .. Miss Selfridge and Dorothy Perkins now irrelevant"Chloe Collins at GlobalData ‘‘Although Arcadia’s CVA has been approved, it is unsurprising it faced backlash from some landlords who have doubts about the retailer’s future .. Topshop and Topman still have a strong following .. Miss Selfridge and Dorothy Perkins now irrelevant"
Melanie Leech, Chief Executive of the British Property Federation, on Arcadia CVAs passing: “Property owners will now want to see Arcadia’s leadership committed to delivering its turnaround plan to restore the long-term health of the business.”Melanie Leech, Chief Executive of the British Property Federation, on Arcadia CVAs passing: “Property owners will now want to see Arcadia’s leadership committed to delivering its turnaround plan to restore the long-term health of the business.”
Here’s the BBC’s Danni Hewson:Here’s the BBC’s Danni Hewson:
So #Arcadia gets its CVA - a fresh start or delaying the inevitable? Shoppers, and I imagine landlords, will be watching to see what the Green’s do with this second chance. #retailSo #Arcadia gets its CVA - a fresh start or delaying the inevitable? Shoppers, and I imagine landlords, will be watching to see what the Green’s do with this second chance. #retail
And here’s James Child of Estates Gazette:And here’s James Child of Estates Gazette:
Arcadia CVA narrowly passes after protracted discussions with hesitant landlords. No real structural change as far as I can see minus rental reduction / cover. Not sure what the long term plan is but it feels like sticking a plaster on seriously damaged retail empireArcadia CVA narrowly passes after protracted discussions with hesitant landlords. No real structural change as far as I can see minus rental reduction / cover. Not sure what the long term plan is but it feels like sticking a plaster on seriously damaged retail empire
By approving Arcadia’a CVA, its landlords have saved the company from collapsing into administration.By approving Arcadia’a CVA, its landlords have saved the company from collapsing into administration.
That means that your local Top Shop, Miss Selfridge, Dorothy Perkins and Burton store will be open as usual tomorrow. Arcadia’s 18,000 staff will still have a job too.That means that your local Top Shop, Miss Selfridge, Dorothy Perkins and Burton store will be open as usual tomorrow. Arcadia’s 18,000 staff will still have a job too.
But... as part of the deal, some 23 stores will shut, costing hundreds of jobs. Another 25 or so are earmarked to close in future too.But... as part of the deal, some 23 stores will shut, costing hundreds of jobs. Another 25 or so are earmarked to close in future too.
Sir Philip Green's Arcadia retail empire has been saved by a rescue deal that will trigger the closure of 48 stores and a thousand jobs. The plan, a Company Voluntary Arrangement (CVA), was approved by Arcadia's creditors after five hours discussion https://t.co/hLivEecGjISir Philip Green's Arcadia retail empire has been saved by a rescue deal that will trigger the closure of 48 stores and a thousand jobs. The plan, a Company Voluntary Arrangement (CVA), was approved by Arcadia's creditors after five hours discussion https://t.co/hLivEecGjI
Sky News’s Mark Kleinman points out that Arcadia faces further hurdles:Sky News’s Mark Kleinman points out that Arcadia faces further hurdles:
Crucial milestone for Sir Philip Green as required majority of Arcadia Group creditors approve restructuring of tycoon's high street empire. Next key moment will be clearing the 28-day CVA challenge period.Crucial milestone for Sir Philip Green as required majority of Arcadia Group creditors approve restructuring of tycoon's high street empire. Next key moment will be clearing the 28-day CVA challenge period.
This rescue deal will put Arcadia on a firmer financial footing, says its clearly relieved CEO, Ian Grabiner.This rescue deal will put Arcadia on a firmer financial footing, says its clearly relieved CEO, Ian Grabiner.
He says:He says:
“We are extremely grateful to our creditors for supporting these proposals and to Lady Green for her continued support. After many months of engaging with all our key stakeholders, taking on board their feedback, and sharing our turnaround plans, the future of Arcadia, our thousands of colleagues, and our extensive supplier base is now on a much firmer footing.“We are extremely grateful to our creditors for supporting these proposals and to Lady Green for her continued support. After many months of engaging with all our key stakeholders, taking on board their feedback, and sharing our turnaround plans, the future of Arcadia, our thousands of colleagues, and our extensive supplier base is now on a much firmer footing.
“From today, with the right structure in place to reduce our cost base and create a stable financial platform for the Group, we can execute our business turnaround plan to drive growth through our digital and wholesale channels, while ensuring our store portfolio remains at the heart of our customer offer.“From today, with the right structure in place to reduce our cost base and create a stable financial platform for the Group, we can execute our business turnaround plan to drive growth through our digital and wholesale channels, while ensuring our store portfolio remains at the heart of our customer offer.
“I am confident about the future of Arcadia and our ability to provide our customers with the very best multi-channel experience, deliver the fashion trends that they demand, and ultimately inspire a renewed loyalty to our brands that will support the long-term growth of our business.“I am confident about the future of Arcadia and our ability to provide our customers with the very best multi-channel experience, deliver the fashion trends that they demand, and ultimately inspire a renewed loyalty to our brands that will support the long-term growth of our business.
“Finally, I would like to thank all of our team and advisors for their support throughout the CVA process. It has been incredibly challenging for all concerned but I believe this is the right outcome for all our creditors.”“Finally, I would like to thank all of our team and advisors for their support throughout the CVA process. It has been incredibly challenging for all concerned but I believe this is the right outcome for all our creditors.”
It’s Official: Arcadia’s creditors have, as we thought, approved the company’s rescue plan.It’s Official: Arcadia’s creditors have, as we thought, approved the company’s rescue plan.
Here’s the company’s statement, which explains how the Green family are putting millions of pounds of their own money into the deal (to persuade landlords to swallow hefty rent reductions).Here’s the company’s statement, which explains how the Green family are putting millions of pounds of their own money into the deal (to persuade landlords to swallow hefty rent reductions).
Arcadia Group creditors approve CVA proposalsArcadia Group creditors approve CVA proposals
Arcadia Group is pleased to announce that all seven of its Company Voluntary Arrangements (CVAs) have today been approved by the required majority of the companies’ creditors, including its pension trustees, suppliers and landlords.Arcadia Group is pleased to announce that all seven of its Company Voluntary Arrangements (CVAs) have today been approved by the required majority of the companies’ creditors, including its pension trustees, suppliers and landlords.
As described in the CVA proposals, upon there being no remaining risk of challenge to the CVAs, the Group’s majority shareholder, Lady Green, will invest £50m of equity into the Group, in addition to the £50m of funding already provided in March. Lady Green has also agreed to fund the cost of the amended rental reduction terms within the CVA proposals, as announced on 7 June.As described in the CVA proposals, upon there being no remaining risk of challenge to the CVAs, the Group’s majority shareholder, Lady Green, will invest £50m of equity into the Group, in addition to the £50m of funding already provided in March. Lady Green has also agreed to fund the cost of the amended rental reduction terms within the CVA proposals, as announced on 7 June.
Separately, the Group has reached an agreement with the Trustees of the pension schemes, the Pensions Regulator and the Pension Protection Fund, by which Arcadia Group will reduce its deficit repair contributions from £50m to £25m per year, for three years, with security granted to the value of £210m over certain assets of the Group, to further support the schemes.Separately, the Group has reached an agreement with the Trustees of the pension schemes, the Pensions Regulator and the Pension Protection Fund, by which Arcadia Group will reduce its deficit repair contributions from £50m to £25m per year, for three years, with security granted to the value of £210m over certain assets of the Group, to further support the schemes.
As previously announced, Lady Green will provide an additional £100m of cash into the schemes to help bridge the shortfall, with funding of £25m per year for the next three years plus an additional £25m contribution.As previously announced, Lady Green will provide an additional £100m of cash into the schemes to help bridge the shortfall, with funding of £25m per year for the next three years plus an additional £25m contribution.
Property Week’s David Parsley has also heard that Sir Philip Green may have succeeded in persuading creditors to back his rescue plan.Property Week’s David Parsley has also heard that Sir Philip Green may have succeeded in persuading creditors to back his rescue plan.
ARCADIA UPDATE: Senior landlord source claims Arcadia rescue deal has passed. #arcadia announcement to confirm due at any moment.#arcadialiveARCADIA UPDATE: Senior landlord source claims Arcadia rescue deal has passed. #arcadia announcement to confirm due at any moment.#arcadialive
My colleague Sarah Butler has heard that all seven of Arcadia’s CVAs have passed.My colleague Sarah Butler has heard that all seven of Arcadia’s CVAs have passed.
Hearing all seven Arcadia CVAs have passed..Hearing all seven Arcadia CVAs have passed..
That’s unconfirmed at this stage -- but if it’s correct, it means that the threat of administration has been lifted.That’s unconfirmed at this stage -- but if it’s correct, it means that the threat of administration has been lifted.
It would mean that 23 stores would close, but the rest of Arcadia’s 500+ estate of shops would keep trading.It would mean that 23 stores would close, but the rest of Arcadia’s 500+ estate of shops would keep trading.
More to follow!More to follow!
The delay is causing some jitters among Arcadia’s landlords.....The delay is causing some jitters among Arcadia’s landlords.....
Arcadia vote result not till 5-5.30. One landlord just said to me "why is it taking so long to count up the votes.. especially as the place was teaming with Deloitte staff?". They're getting worried.Arcadia vote result not till 5-5.30. One landlord just said to me "why is it taking so long to count up the votes.. especially as the place was teaming with Deloitte staff?". They're getting worried.
Oh dear! We’ve now hearing that the results of the creditors’ vote may not come for another hour or so.Oh dear! We’ve now hearing that the results of the creditors’ vote may not come for another hour or so.
Hearing we might not get result of Arcadia CVA vote until 5 or even 5.30.. not looking promising..Hearing we might not get result of Arcadia CVA vote until 5 or even 5.30.. not looking promising..
That’s two hours later than expected.That’s two hours later than expected.
What does it mean?What does it mean?
It could be a sign that at least one of the seven CVA agreements has been rejected (confusingly, there is one vote for each of Arcadia’s seven brands).It could be a sign that at least one of the seven CVA agreements has been rejected (confusingly, there is one vote for each of Arcadia’s seven brands).
Or it could mean that Sir Philip Green is engaged in some last-minute arm twisting.Or it could mean that Sir Philip Green is engaged in some last-minute arm twisting.
This is turning into a repeat of last Wednesday’s meeting, when the CVA process was dramatically delayed once it became clear the vote was going against Arcadia.This is turning into a repeat of last Wednesday’s meeting, when the CVA process was dramatically delayed once it became clear the vote was going against Arcadia.
Journalists, alas, weren’t allowed into today’s Arcadia meeting, but here’s some photos from outside:Journalists, alas, weren’t allowed into today’s Arcadia meeting, but here’s some photos from outside:
ARCADIA UPDATE: Such a little sign for such an important meeting. #arcadia #arcadialive pic.twitter.com/G7IHtVuV67ARCADIA UPDATE: Such a little sign for such an important meeting. #arcadia #arcadialive pic.twitter.com/G7IHtVuV67
One intrepid National journalist almost made it into the Arcadia CVA before security realised he wasn't P Green Esq pic.twitter.com/GR31PkrgwZOne intrepid National journalist almost made it into the Arcadia CVA before security realised he wasn't P Green Esq pic.twitter.com/GR31PkrgwZ
The bells of St Paul’s have rung out to mark 4pm.The bells of St Paul’s have rung out to mark 4pm.
But there’s no word from Arcadia’s creditors meeting, just around the corner from the Cathedral at Etc Venues on Aldersgate. Surely the result of the votes will come soon....But there’s no word from Arcadia’s creditors meeting, just around the corner from the Cathedral at Etc Venues on Aldersgate. Surely the result of the votes will come soon....
Brexit has helped to drag Arcadia to the brink of administration, says senior market analyst Fiona Cincotta of City Index.Brexit has helped to drag Arcadia to the brink of administration, says senior market analyst Fiona Cincotta of City Index.
She points out that a clutch of retailers have hit serious problems since the 2016 referendum:She points out that a clutch of retailers have hit serious problems since the 2016 referendum:
Brexit is slowly but incredibly persistently eroding the confidence and the spending power of the British consumer. The process started fairly discreetly but given that it has now been in place for close to three years it is claiming more and more victims.Brexit is slowly but incredibly persistently eroding the confidence and the spending power of the British consumer. The process started fairly discreetly but given that it has now been in place for close to three years it is claiming more and more victims.
Notable business failures this year alone include Debenhams, LK Bennett, Wine Direct, Office Outlet, Steamer Trading, Patisserie Valerie, OddBins and Jamie Oliver’s chain of restaurants. The list is already long and scary enough without adding the big closures of 2017 and 2018.Notable business failures this year alone include Debenhams, LK Bennett, Wine Direct, Office Outlet, Steamer Trading, Patisserie Valerie, OddBins and Jamie Oliver’s chain of restaurants. The list is already long and scary enough without adding the big closures of 2017 and 2018.
Factor in the rise in online shopping, and high business rates, and it all adds up to a crisis.Factor in the rise in online shopping, and high business rates, and it all adds up to a crisis.
The Arcadia crisis has put Company Voluntary Arrangements (CVA) under the spotlight.The Arcadia crisis has put Company Voluntary Arrangements (CVA) under the spotlight.
CVAs allow a company to restructure itself without going into a formal administration or liquidation. The theory is that it lets fundamentally decent businesses shed underperforming assets and keep running.CVAs allow a company to restructure itself without going into a formal administration or liquidation. The theory is that it lets fundamentally decent businesses shed underperforming assets and keep running.
The practice, critics say, is that creditors are kicked in the teeth when their customers use CVAs to escape contracts.The practice, critics say, is that creditors are kicked in the teeth when their customers use CVAs to escape contracts.
In Arcadia’s case, the firm hopes to cut its overall rental bill (which is says is simply too high in today’s retail environment), and close 23 stores (with another 27 are also earmarked for closure).In Arcadia’s case, the firm hopes to cut its overall rental bill (which is says is simply too high in today’s retail environment), and close 23 stores (with another 27 are also earmarked for closure).
Retail chain Sports Direct has just kicked out at CVAs, saying they let “barely managed” businesses limp on. It’s launching a legal challenge to Debenhams’ recent CVA (which thwarted Mike Ashley’s attempts to take the company over).Retail chain Sports Direct has just kicked out at CVAs, saying they let “barely managed” businesses limp on. It’s launching a legal challenge to Debenhams’ recent CVA (which thwarted Mike Ashley’s attempts to take the company over).
Sports Direct chooses the day of the second Arcadia CVA vote to criticise CVAs in a statement. It claims CVAs are “now being used as a tool to repair fundamentally barely managed businesses”. Yesterday Sports Direct and others launched a legal challenge against the Debenhams CVA pic.twitter.com/6khcipxWKWSports Direct chooses the day of the second Arcadia CVA vote to criticise CVAs in a statement. It claims CVAs are “now being used as a tool to repair fundamentally barely managed businesses”. Yesterday Sports Direct and others launched a legal challenge against the Debenhams CVA pic.twitter.com/6khcipxWKW