Top Shop owner Arcadia agrees CVA

The Arcadia retail group has survived a series of votes over seven company voluntary agreements (CVAs) which saw landlords agreeing to rent reductions on stores

The deal will result in a number of store closures and will preserve around 17,000 jobs, although at least 1,000 jobs will be lost.

Arcadia owner Sir Philip Green’s rescue package was narrowly approved by the companies’ creditors, including its pension trustees, suppliers and landlords in a tense meeting yesterday afternoon. Arcadia’s majority shareholder, Lady Green, will now invest £50m of equity into the group, and has also agreed to fund cost of the amended rental reduction terms within the CVA proposals.

The CVAs cover stores including Topshop, Miss Selfridge and Wallis and will involve store closures and reduced rents across 194 of 566 UK and Irish stores over a three-year period. Around 58 stores are to shut and about 1,000 jobs will be axed immediately.

Ian Grabiner, CEO of Arcadia Group, said: ‘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.’

As well as objections from landlords, Arcadia’s plans came under fire from the Pensions Regulator over concerns about the group’s pension deficit.

Lady Tina Green has also committed to pay £25m annually into the pension funds over three years, plus an additional £25m.

Frank Field, chair of the work and pensions committee, said: ‘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.’

John Webber, head of business rates at Colliers International points out Arcadia will now be able to take a business rates holiday on some of its stores and pay a reduced business rate obligation  for the rest of the current rating year (to April 1st 2020), according to the terms of  two of its CVA documents.

Business rates' hole

Colliers has estimated that Arcadia’s current 480 UK stores were currently due to pay a business rates bill of around £80m this financial year (April 2019/20).

Councils are set to lose out with months of future unpaid business rates.

By the terms of the CVA, 160 local authorities will not be paid business rates on Top Shop and Top Man stores for the rest of the year, with the hope that provided the company is turned around in three years’ time, councils will then receive 5% of what they were owed.

Having reviewed Arcadia’s CVA proposals, Colliers says this means a hit to local authority finances of around £24m for the current financial year.

Webber said: ‘Arcadia’s CVA has followed a precedent set out by Debenhams three weeks ago, where that troubled retailer had to virtually half its rates bill for this billing year through its CVA. It now looks like other retailers are being forced to follow suit.’

The Centre for Retail Research has estimated the retail sector paid a total of £7.6bn in business rates in 2018-19.

Webber said: ‘It is clear that for many retailers to survive in the near term, they cannot cope with a 50p tax along with business rates rises every year along with inflation, irrespective of whether the business is doing well or badly.

'If you add in that many in the sector are paying considerably more in business rates than they should be due to the onerous effects of downward phasing on their rates bills, following the 2017 Rating Revaluation, you can see that this is not a neutral tax at all. It looks like Arcadia has had to make such demands to survive.’

Pat Sweet

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