A vote on Sir Philip Green’s proposal to creditors and landlords aimed at saving his Arcadia retail empire was postponed last night, leaving thousands of the group’s employees in limbo for another week.
The Daily Telegraph understands that “the decision was taken after advisers realised that the Company Voluntary Arrangement (CVA) was close to failing after some heavyweight landlords rejected the plans”.
The crunch vote on the troubled stores, which include Miss Selfridge and TopShop, has now been delayed until next Wednesday.
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Describing the move as “quite extraordinary”, The Guardian says “the retail magnate is clearly desperate to use the time to persuade landlords that his offer is better than plunging the whole empire into administration... But this is extremely worrying for its workforce”, which numbers more than 18,000.
While Arcadia has suffered from the wider slump in high street sales, its biggest problem appears to be its massive £170m-a-year rental bill. In a bid to win support for his proposed CVA – an agreement between a company and its creditors which would allow him to reduce his rental bill and close unprofitable stores – Green has offered landlords a 20% stake in the business and a £40m compensation fund.
Similar CVA’s have been used to keep other struggling retailers such as Debenhams and House of Fraser alive and “up to now, landlords have largely been forced to accept that in the current retail climate, having a tenant paying anything at all is better than having the building stand empty”, says BBC business editor Simon Jack.
“But some industry insiders say that many landlords have been looking for a moment to hold the line and there’s a chance this could be it,” he says.
“They also reasoned that if Sir Philip secured the big rental discounts he’s after then other tenants would demand the same, and perhaps threaten to follow him down the CVA route in time,” writes James Moore in The Independent.
The Telegraph reports “there was also some incentive for some landlords to see Arcadia fail and re-emerge out of administration with just its strongest brands, such as Topshop, which had a better chance of long term survival”.
But Moore says it is “fair to question the role [Green] personally played in all this too, with his aggressive, abrasive style of doing business and the demands he’s made of landlords in the past. This could have contributed to the reluctance of some to give any quarter now he needs their help. You reap what you sow in business.”
The BBC’s Jack adds: “Almost all of the recent CVAs have been passed despite the gritted teeth of landlords. If this does turn out to be the moment they fight back in sufficient numbers, Sir Philip Green will know his high street luck has really run out.”
