Arcadia rescue deal approved by creditors, saving thousands of jobs
Plan to save Philip Green’s retail empire wins backing of creditors
Philip Green, whose retail empire faces a make-or-break vote on its future on Wednesday as it seeks approval for its restructuring plans, deciding the fate of 18,000 employees. Photograph: Isabel Infantes/PA Wire
Philip Green’s Arcadia fashion group has secured backing for a controversial restructuring plan after a meeting of creditors voted to approve it.
The owner of brands such as Topshop and Wallis needed three-quarters of its unsecured creditors to back the plan, known as a company voluntary arrangement. At a meeting in London, Arcadia received that – although the company did not immediately divulge by what margin.
The move clears the way for 23 of its 566 stores across Ireland and UK to close outright, with rents reduced by up to 70 per cent on 194 more. Under Green’s plan six stores in the Republic have been earmarked for closure, including the flagship Topshop outlet at St Stephen’s Green in Dublin and the brand’s shop in the Jervis Shopping Centre. All 11 Topshop/Topman stores in the US are to shut.
“We are extremely grateful to our creditors for supporting these proposals and to Lady Green for her continued support,” said Ian Grabiner, Arcadia’s chief executive.
He was referring to a last-minute compromise on the part of Sir Philip and his wife, whereby they reimbursed the worst-affected landlords to limit rent cuts to 50 per cent. The move helped sway the latest vote despite the opposition of Intu, one of the company’s biggest landlords. Lady Tina has also financed a separate agreement with the UK’s Pensions Regulator.
“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,” Mr Grabiner added.
A similar meeting last week had to be adjourned after it became clear that not all of the schemes – there are seven CVAs in all – would secure the requisite support. Many property companies bitterly resented the terms of the CVA, saying that it was opportunistic and forced creditors to foot the bill for years of under-investment in the core operations.
Arcadia has said it will invest £135 million (€151 million) over three years in refurbishing stores, improving its website and building more distribution capability. But this represents a lower rate of capital spending than seen in previous years and is being financed by improved profit and cash flow, not new investment into the business.
Landlords who voted in favour of the plan will share about £40 million (€45 million) from a compensation fund, and if Arcadia is sold in the future they will also take 20 per cent of any equity value ascribed to it.
– Copyright The Financial Times Limited 2019