Sports retailer JJB Sports has confirmed it is to attempt a second Company Voluntary Arrangement (CVA) within two years in order to ensure the survival of the business.
The troubled retailer said it had an “open and constructive dialogue” with its major landlords, representing about 40% of the retailer’s annual rental payments, regarding the “future shape of the group’s property portfolio”.
The retailer said its future viability is “dependent upon the successful implementation of a CVA”. JJB said that if it did not secure the necessary funding and the CVA it will “no longer be able to trade as a going concern which would result in the appointment of receivers, liquidators or administrators”.
JJB shareholders are to vote later this month on the retailer’s plea for £30m of fundraising.
JJB’s review has identified up to 45 stores which are “significantly under-performing and which the Board does not believe can form part of the Group’s property portfolio going forwards”.
It has also identified a further 50 stores which are “currently under-performing but which have the potential to form part of the core group of properties”.
JJB said it intends to keep these 50 stores under review for a period of up to two years “with a view to determining whether or not those stores can become viable and, if not, the Company intends to reserve the right to close those stores”.
However, JJB regards 150 of its stores as “core to the Group’s future”. It will send out details of the proposed CVA “later this month”.
In Retail Week magazine this week, landlords said they would be wary of backing a further CVA.
The terms of the CVA include the closure of the 45 under-performing stores in the next 12 months; an agreement on a review period of the remaining stores, with an option to close up to a further 50 in the next 24 months. It also wants to pay rents monthly, as opposed to quarterly.
The retailer said it would continue to pay rates on closed stores in the period up to the first break date under each lease. It also wants a rent reduction on those stores that it plans to close.
JJB needs to obtain approval from 75% of its unsecured creditors to achieve the CVA.
It said that the restructuring will be conditional on whether it secures a further equity capital raising and the continued provision of banking facilities.
The retailer said that the CVA proposals will “facilitate a better outcome” for creditors than an administration or liquidation, and is “therefore in the best interests of the Company and its shareholders”.
JJB Chairman Mike McTighe said: “We have today announced key details of the proposed restructuring of our store portfolio, one of the crucial steps in restructuring JJB.
“The Board and management team are working urgently on a fundamental restructuring plan which will significantly strengthen JJB’s finances and build on the Group’s strengths. We are confident that, with the support of our key stakeholders, we can complete this restructuring in the coming weeks.”