Philip Green's retail group Arcadia was granted a stay of execution last week as creditors voted to approve seven company voluntary arrangements (CVAs), a controversial process that allows companies to restructure their debts in order to fend off administration.
CVAs commonly involve a reduction of the amount of rent companies need to pay their landlords. As so many retailers have entered into CVAs in recent years, this has led to accusations that they are using the mechanism merely to duck out of rental responsibilities.
Indeed, the vote on the CVAs was originally postponed when it became clear that not enough parties would vote in favour of the arrangements.
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Despite the delay, shopping centre owner Intu, one of Arcadia's largest creditors, voted against the proposal: "we firmly believe that any rent cuts... are unfair to our full-rent-paying tenants and not in the interest of any of our other stakeholders, including Intu's shareholders and the 130,000 people whose jobs rely on the success of our prime shopping centres". Property funds British Land and Hammerson were among the creditors who voted in favour of the CVAs.
The agreement should save up to 17,000 jobs at Arcadia, although realistically it may just be pushing the group's problems down the line. Arcadia can now cut rents by up to 70% at nearly 200 locations, but will close 23 of its 566 shops and axe 520 jobs. Once the arrangement is in place, it will close a further 25 shops and cut 500 jobs.
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