JJB Sports has been given the green light for a company voluntary arrangement (CVA) by creditors and shareholders in order to stave off administration.
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The deal, which gave JJB the go-ahead to shed 43 stores by April next year and the option to close a further 46 in 2013, was backed by more than 96% of its creditors. More than 75% of the retailer’s landlords backed the scheme and will accept rent of 55% of current levels on the 89 affected shops.
JJB Sports chief executive Keith Jones said a potential financial ‘clawback’ for landlords and option to take back stores had helped sway opinion in support. The CVA, organised by KPMG, offers up to £7.5m to landlords if JJB recovers or is taken over. The exact amount is linked to JJB’s market performance.
Jones said: “The principle of consulting with landlords, listening and factoring in their concerns is crucial. Anyone embarking on a CVA should engage with stakeholders openly and often.”
The CVA, the retailer’s second in two years, gives the sportswear retailer a shot at survival. JJB will now continue based on a revised business plan that centres on revamping stores and improving product and service.
Jones said it had already tried out a new staff training programme in three stores and would roll it out for another nine this month. Its latest revamped store will open by the end of May.
JJB’s leading shareholders have also agreed to take part in a £65m capital-raising to fund the new business plan. Others will be invited to participate in a bookbuild, carried out by Numis, next month.
Following JJB’s CVA success the British Property Federation (BPF) warned that the approval of the plan was not a green light for further “opportunistic” proposals.
BPF chief executive Liz Peace said: “This is not an opportunistic dumping of stores, rather a genuine attempt at rescuing the business, and should not be seen as a green light for other retailers to restructure their portfolios atthe expense of both landlords and their competitors.”
Restructuring adviser MCR, which is not involved with JJB, also warned that CVAs should not be used as a tool to prolong the demise of failing retailers. Partner Phil Duffy said: “The market should be afraid of the incorrect use of CVAs, where their use is purely a means of putting off payments to suppliers while the business issues that have caused the cash problems are still there.”