Further company voluntary arrangements (CVA) are expected in the next few months as the lagged impact of the recession takes effect, restructuring expert KPMG said.
While insolvencies have fallen in recent months, some retailers are expected to fail as the recovery puts pressure on weakened companies to restock and pay down debt.
Brian Green, restructuring partner at KPMG, told the Financial Times: “We’ve proposed eight CVAs in the past year and our current pipeline suggests we will propose double this figure in 2010.”
Green said: “The GDP figures may be the technical end of recession but the feeling on the street is far less clear cut… Cases such as JJB and Blacks Leisure, combined with insolvency regime reform, have prompted many distressed retailers to consider a CVA.”
CVAs have sparked some criticism. Speaking at the British Property Federation summit this morning, Mark Bowles, property director at HMV said: “I can see why CVAs are used although I don’t agree with some of the motives behind them. They don’t offer everybody a level playing field, and allowing firms to be released from lease liabilities is an appropriate way to manage the situation.”
The BPF said some landlords were angry by the decision of Blacks to re-enter some of the areas it had just left via a CVA.
Liz Peace, chief executive of the BPF, said: “Many landlords were spitting blood at the news about Blacks. While the property industry has been much more responsible than in the past, it can’t be expected to bail out firms that have over-expanded or simply made bad business decisions. This growing resentment for CVAs may mean that others aren’t quite so lucky.”