The Death of Pre Pack Administration to Connected Directors & Shareholders?
New laws regarding Pre Pack Administrations come in April 2021. It mainly governs the process where the sale is made to a connected party. An evaluator will be required to approve the transaction.
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Arcadia brand Outfit is to have its stores closed down by the end of the month
19 January 2021Deloitte, administrators of Sir Philip Green's Arcadia empire announce its Outfit operation will close down by the end of the month, with more that 700 jobs lost.Outfit brings all of the tycoon's retail brands, including Topshop, under one roof.It has 21 sites, mainly in out-of-town shopping destinations.In regards to other brands, so far Evans is the only which has been sold - and this did not include its store network.Next and JD Sports are rumoured to be among the competing bidders for the brands, with Topshop the most valuable and others including Burton, Wallis and Dorothy Perkins.This being said, any deal is expected to result in the loss of some jobs as the new owners are unlikely to retain the group's entire estate of around 400 stores in the current market.21 December 2020It has been announced today that Evans' brand, commerce and wholesale business has been sold to City Chic Collective for £23 million.A deal is expected to be completed on December 23, which will lay out the terms of the sale of the brands' intellectual property, customer base and inventory, to City Chic. Evan's store network will not be purchased and administrators, Deloitte state stores will continue trading for now.Evans, plus-size clothing and footwear retailer is a part of Sir Philip Green's collapsed retail empire, Arcadia.City Chic Collective is listed on the Australian stock exchange and specialises in plus-size women's fashion. It operates mainly online in the US, Australia and New Zealand.Deloitte said that the process to find new owners for the other Arcadia brands i.e. Topshop, Topman and Dorothy Perkins, was ongoing and that there has been significant interest expressed for each.30 November 2020Arcadia Group collapses into administration. The collapse of Sir Philip Green's retail empire leaves 13,000 jobs hanging on a thread. It becomes just another corporate failure from COVID-19.The retail empire operates from 444 UK sites and 22 overseas. It also has an online arm.As of yet, no redundancies or store closures have been announced. The business will rather trade as normal, with stores ready to re-open ahead of the UK lockdown restrictions being lifted this week.Appointed administrators from Deloitte begin the search for a buyer for the business.27 November 2020It has been reported by Sky News that Arcadia Group is facing collapse within days.As soon as next week, administrators from Deloitte are thought likely to be appointed to Sir Phillip Green's retail empire.Arcadia Group owns Topshop, Burton and Dorothy Perkins. 15,000 jobs are at risk.A retail industry figure said that the collapse of Arcadia is inevitable following unsuccessful talks with lenders about an emergency £30m loan.If insolvency is confirmed it is thought this will be a catalyst for creditors scrambling to get their hands on the companies assets, even its online operations!Sky News report more.14 November 2020It has been reported that Arcadia Group is in a race to secure £30m.Talks with a number of parties are underway, in hopes to get the funds needed to prop up the business after the second English lockdown halted its pre-Christmas trading plans.Without this financial backing, will Sir Philip's empire survive the coronavirus pandemic?27 July 2020The latest on the situation of Arcadia Group is that they are said to be on the verge of launching another restructure, after being battered by the coronavirus lockdown. If another restructure is launched, it would be the second for the retail giant in just over a year.According to The Sunday Times, the company recently put forward a cost-cutting plan to the Pensions Regulator. Though exact details are unknown, it is reported that Arcadia has a deficit of £727 million in its pension funds.The Retail Gazette report more.09 April 2020An update on the situation of Arcadia Group is that they are seeking £50 million worth of funding, approaching banks and hedge funds.The funding is to be for its distribution centre in Daventry, Northamptonshire, to help support the business through the coronavirus crisis.A potential lender, approached about the plan has said that the company indicated its interest in getting a deal agreed as soon as it can. Currently there is no further update as to if a deal has been reached or not.06 April 2020Arcadia Group is rumoured to be facing a winding-up petition as it cancels orders to suppliers in a bid to stay afloat amid the coronavirus outbreak.According to a spokesperson for the company, no decisions have been made yet. But, the terms of a rescue plan which was agreed with creditors in June 2019, provided possibility of more store closures than the initially planned 22.Last week it was reported that court records showed Principle Systems, a subsidiary of marketing company Principle Global, filed a winding-up-petition against Sir Phillip Greens’ retail empire. This is likely to be resolved but indicates a bigger matter than Arcadia are joining other retailers in delaying payments to suppliers in order to conserve cash. It is also likely that the petition wouldn't be heard for a long time anyhow with many hearings being pushed into the Summer.Principle Systems developed furniture and branding for the latest Ivy Park and Kate Moss collections in Topshop.It is also heard that Arcadia are likely to serve notice on landlords to walk away from many of its 550 stores this week.With the coronavirus pandemic hitting, there has been a dramatic fall in revenues for the business amongst other fashion retailers. Many retailers are scared that the once stores can re-open, the economic impact left with greatly reduce demand.Following the governments lockdown measures, all stores have been forced to shut temporarily. Its e-commerce arm continues, despite a small proportion of sales coming to the group this way, compared to rivals such as Next.Arcadia Group took further measures and cancelled orders with suppliers and changed payment terms on items already delivered, extending payment terms by 30 days.Last week, Arcadia Group made 14,5000 of its 16,000 total workforce furloughed, under the government’s Coronavirus Job Retention Scheme. This was for all store staff with the majority of it’s HQ employees to follow this week. Its senior leadership team and board will take salary cuts of between 25 and 50 per cent, whilst group chief executive Ian Grabiner has elected to receive no salary or benefits until the pandemic ends. With regards to fixed-term employment contracts, employees were told they would end early.The pandemic has worsened Arcadia’s problems after several years of decline and a delayed entrance to the online retail market.Background to Arcadia’s CVA:Last year, after weeks of bargaining with landlords, the group moved to paying monthly rent rather than quarterly, with large rent reductions imposed at many trading locations.The Company Voluntary Arrangement (CVA) it was under also included break clauses that allowed either the company or its landlords to break leases at certain intervals. The agreement covered for 20 Topshop and Topman stores where the company could trigger a break clause within six months of the CVA and a further 19 where leases could be broken after a year. The locations included Westfield Stratford and provincial towns such as Doncaster.
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HMRC To Become Preferential Creditors
Since 1 December 2020 a change in the law has meant that the way in which some liabilities due to H M Revenue & Customs (“HMRC”) are dealt with in an insolvency situation has changed. Previously, monies due to HMRC are dealt with in exactly the same way as monies due to trade suppliers, landlords, utility companies and so on. However, as of 1 December 2020 this changed and some monies due to HMRC will become “preferential” and will therefore come before other creditors.The reform only applies to taxes which are collected and held by businesses on behalf of other taxpayers, i.e VAT, PAYE, Income Tax. For taxes owed by businesses, the changes are non-applicable i.e for corporation tax and employer’s national insurance contributions.It’s believed that this decision will add £185 million to the treasury’s overall tax intake, over a year.HMRC will continue to offer time to pay arrangements if viable businesses with tax debts need to avoid insolvency. The measure is expected to combat tax avoidance. But doubts arise in that it will transfer the losses to the private sector, have a knock-on effect of borrowing costs and leave employees and suppliers with smaller pots when businesses go bust. However, the Treasury states that most unsecured creditors are unable to recover their debts anyway, so will be unaffected.On the face of it, this might not seem too important, but it could really impact on both your company and any personal guarantees you may have given to say banks or other lenders. What are the implications for directors that have given personal guarantees? The issue is that many banks and other lenders rely on what is called a debenture, which creates fixed and floating charges, to give them security over the assets of a company. In essence, this means that in a formal insolvency, such as liquidation or administration, monies realised from the sale of assets, or the collection of book debts, go to repay any sums due to the bank or other lender. However, where the assets are covered by a floating charge (usually plant, machinery, vehicles, stock, cash balances, book debts which are not subject to a factoring agreement), then any monies realised from those assets MUST first go to pay any preferential creditors.At the moment, the only preferential creditors are certain employee claims which are usually fairly modest, so the bank or lender gets most (c80%) of the money realised after payment of the modest preferential claims and after providing a percentage of the monies to deal with the claims of all other creditors. This is known as the Prescribed Part, it is set down in statute and usually equates to somewhere just over 20% of the monies realised.However, after 1 December 2020, the claims of the preferential creditors might be significantly higher due to monies due to HMRC. This would therefore mean that the monies paid to the bank or other lender might be significantly reduced. If this results in a shortfall to the bank or lender which you as a director have personally guaranteed, this could be a MAJOR concern. It might also result in significant concerns for your bank or other lender!Obviously, not all companies are the same and each companies' individual circumstances may vary. However, this could be quite a problem for some companies and directors. See Below Creditors Priority
ReadCaffe Nero appoint KPMG to assess options
2.12.2020Gerry Ford, the controlling stakeholder of Nero Holdings, pledges a £5m survival fund for Caffè Nero.Creditors of the coffee chain voted earlier this week and approved a CVA after the board refused to adjourn the vote following late emergence of a takeover bid.As part of the CVA, on the condition it was approved, shareholders committed to provide a £5m standby fund for the business, in case additional liquidity was needed. This is to be particaulary helpful in ensuring the survival of the business and protecting creditors until more normal trading conditions can return and when the agreed turnover-based rent structure can occur.30.11.2020Mohsin and Zuber Issa, the billionaire brothers behind the British petrol retailing powerhouse EG Group, have launched a takeover bid for Caffe Nero, just hours before the chain seeks approval from landlords to cut its rent bill.A CVA is to be voted on this afternoon. However, it is unclear if Caffe Nero has responded to the EG offer yet and so what the offer terms are - could the bid force the coffee chain to postpone the vote?Update 13.11.2020Last night coffee chain, Caffe Nero put itself into a company voluntary arrangement.Founder, Gerry Ford, explained that this was due to the second lockdown which has caused the chain to suffer, from limits to socialising, less shoppers in town centres and workers being told to work from home.KPMG are working with the company on this insolvency procedure. The CVA needs to be backed by landlords and creditors to be successful.------------------------------------------------------------------------It is understood that high street coffee chain, Caffe Nero, is the latest to look into rent cuts from its landlords in order to allow itself to recover from COVID-19 which has caused devastation to the hospitality sector.KPMG has been appointed to help the chain assess its options which include mechanisms to cut rents and close stores. Could a CVA, known to help struggling businesses cut rents and close stores, be likely?Caffe Nero has 660 UK stores, with almost all of its outlets, minus 30, reopening since the coronavirus lockdown ended in June.Before Coronavirus hit, 135 million customers were served annually and the chain had around 5000 employees. As with others in the hospitality sector, the unprecedented virus and lockdown has had a massive impact.A source close to the company has said that exectuvies have been engaging in ‘’constructive dialogue’’ with landlords but needed talks to intensify as the company seeks to address its fixed cost base.Sky News report more.
ReadHayford & Rhodes is sold to McQueens Flowers
KSA Group is pleased to announce that one of the oldest luxury florists in London, Hayford & Rhodes, has been sold to McQueens Flowers.Established in 1924 in London, Hayford & Rhodes began their story as William Hayford, a heritage luxury florist, whom were the first in the City to deliver flowers on a wide scale and became the florist of choice for high profile clients including Winston Churchill, The Mayor of London and The Queen Mother. Now they are an award-winning florist, delivering bespoke designs to diverse client groups, suiting all types of occasion. They live by and stand out from the competition by striving to achieve its mission to never replicate the same design twice.Unfortunately, the recent pandemic forced a temporary cessation of a large proportion of the business and resulted in the need for the company to be restructured. Wayne Harrison and Eric Walls of KSA Group were appointed as administrators on 27th August 2020 with the business being sold to McQueens Flowers Ltd, saving 8 jobs.McQueens Flowers Ltd have been in the florist industry since 1991, gaining a reputation for creating colourful, creative floral designs, perfectly matched to every occasion and setting. It has provided the flowers for the prestigious Vanity Fair Oscars After party for the last 25 years, among being involved in many other stunning high-profile events. Not only does it have a flower shop offering same-day delivery in London, but it also has creative studios, workshops and flower schools in London, New York and Seoul and serves customers worldwide, including UAE, Hong Kong and Australia.
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Select Fashion Goes Bust But Shops Sold
Fashion retailer, Select has finally disappeared from the High StreetBack in 2018 the CVA saved 2000 jobs and resulted in rent cuts of up to 75 per cent and another one was proposed in 2019 but overturned. Since then the company has been slowly cutting stores back.It is understood that insolvency firm Moorfields has been appointed liquidator following a creditors meeting last Friday.The group had already shut 35 shops in mid-March having quietly trimmed down its estate since the start of the year.The retailer is left with 48 shops and they have been sold to Essence Fashion Limited. These are expected to stay open but any people made redundant following the liquidation have been told to make a claim via the redundancy payments office.If you are an employee of the business then you can claim redundancy through the government. Please see this page on help for employeesThe company has reassured that those remaining employees will get their pay from last month but there may be some delay. This is according to reports that have seen a letter from the company. Once the company is in liquidation then it is controlled by the liquidator.In essence this is what is called a pre pack liquidation and is quite rare. They may have chosen to do this outside administration to keep costs down.The company reported a pre-tax loss of £1.1 million for the year to the end of February 2023, according to its most recently-filed accounts.
ReadBuzz Bingo announce CVA plans to protect its future
This news comes as part of a coronavirus crisis rescue deal for the group.Buzz Group, the UK’s largest retail bingo operator by club numbers ahead of Mecca, said it had been forced to make ‘’difficult decisions’’ since its estate was placed into lockdown when the pandemic first hit.Chris Matthews, CEO told members that the permanent closures would be a part of a company voluntary arrangement restructuring deal to ‘’protect the future of Buzz Bingo’’.The following sites are listed to be shut down:Antelope Park (Southampton) Banbury Boston Bournemouth Bridlington Carlisle Chathnam Chorley Cramlington Debry Foresters Edinburgh Westerhailes Harpurhey Hereford Kilmarnock Milton Keynes Oxford Kassam Stockland Green Salford Sailsbury Tamworth Wednesbury Weymouth Wigan Robin Park Wolverhampton Worcester Wythenshawe573 jobs are at risk from the above listed 26 permanent bingo hall closures.Buzz, which also has an online operation, said its other 91 clubs would continue to trade. Re-openings are planned to begin at 12 sites from 6 August.Matthews stated: "The ongoing pandemic has had far-reaching consequences for the entire leisure and hospitality sector and an immediate and significant impact on our business. Following a thorough review of our options, the proposed CVA will restructure our retail portfolio to ensure we are well positioned for a return to growth, while adapting to the ongoing, challenging environment as we start to reopen the majority of our clubs."
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Harveys Furniture Goes Into Administration
Harveys Furniture has gone into administration as it fails to find a buyer.240 jobs have been immediately lost whilst 1,300 others are at risk. Harveys’ sister chain, Bensons for Beds was also put into administration, though it was bought out in a pre-pack administration by its private equity owner, Alteri Investors..Administrators from PwC are looking for a buyer, which includes the purchase of its 20 stores and three manufacturing sites.For now, its stores continue to trade but those in the industry believe a buyer is unlikely to be found.Zelf Hussain, joint administrator at PwC said: ‘’the group had been facing increasingly challenging trading conditions in recent months, in particular Harveys furniture business. This has resulted in cashflow pressures, exacerbated by the effects of coronavirus on the supply chain and customer sales. It has not been possible to secure further investment to continue to trade the group in its current form.”
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Oasis and Warehouse likely to go into administration
17/06/2020Almost two months after Hilco Capital secured a deal to buy the Oasis and Warehouse brands, saving it from administration, we hear that the Oasis and Warehouse online businesses and their associated intellectual property would be bought by Boohoo.Boohoo has a market value of almost £4.7bn. Its portfolio of brands now moves to 9. Just last month it struck a deal to buy the minority interests in women's fashion retailer, PrettyLitttleThing.30/04/2020Today we hear that Hilco Capital, the former owner of HMV, has agreed a deal with administrators regarding high street fashion chains, Oasis and Warehouse.Hilco has agreed to buy both brands, along with Idle Man and the stock from their many outlets across the UK. So, the intellectual property assets and some stock has been sold.However, Oasis and Warehouse Group's stores are not included in the deal, meaning immediate redundancy is the case for over 1,800 staff. The staff have been told no statutory redundancy pay will be received.Since, April 22 the retailers stopped trading online because of the “rising costs of fulfilling online orders and associated logistical challenges, after appointing Deloitte as administrator the previous week.''Joint administrator of Deloitte, Rob Harding explained the sadness of having to said: “It is with great sadness that we have to announce a sale of the business has not been possible and that we are announcing so many redundancies today. This is a very difficult time for the Group’s employees and other key stakeholders and we will do everything we can to support them through this.”15/04/2020Addressing the rumours from yesterday, it is now confirmed that high street fashion chains, Oasis and Warehouse have fallen into administration. Deloitte are the appointed administrator.92 stores and 437 concessions are affected, all these being in UK. 200 jobs have been lost with immediate effect. Around 1,800 staff, including those on the shop floor, in concessions and those at head office, will be furloughed.The brands will continue to be sold online, whilst the administrators work on finding a buyer.Chief Executive of Oasis and Warehouse, Hash Ladha explained the situation as unpredictable, shocking and difficult for all.Joint Administrator at Deloitte, Rob Harding said how the retail industry as a whole was suffering devastating effects from coronavirus."Despite management's best efforts over recent weeks, and significant interest from potential buyers, it has not been possible to save the business in its current form."It is thought that there will be interest from bidders in buying the businesses but of course with the current economic situation, it is all very uncertain.14/04/2020Oasis and Warehouse look likely to be the next casualties of the coronavirus crisis. Sky News has reported that they are about to file an intention to appoint administrators at Deloitte, with an announcement expected later on Tuesday or Wednesday.Three weeks ago The Oasis and Warehouse Group, which is owned by the failed Icelandic lender Kaupthing, was approached for a possible sale from an unnamed buyer. Kaupthing has managed to offload some of its brands already such as Karen Millen and Coast to Boohoo.Although there is understood to have been strong interest in a deal, the uncertainty caused by the coronavirus pandemic is thought to have made a solvent sale impossible to conclude.Both retailers support approximately 2300 jobs.The difficulty facing many retailers is stark. The High Street has already been under pressure and the creditworthiness of these companies has made them unlikely to be able to draw on the government help with respect to loans. Yes, they can benefit from the furlough arrangement and the business rates but with high rents and creaking balance sheets it is likely that many won't be able to make it through this crisis.
ReadIntu warns it could go bust unless it can raise additional finance
01 May 2020In attempt to fix its balance sheet, Intu, the struggling shopping centre has appointed David Hargrave as chief restructuring officer and non-executive director.Hargrave is experienced in the transaction businesses of the Big 4 accounting firms. He has worked in leading processes of change or business restructure. He was a partner at EY and PwC.Intu stated it received 40 per cent of its rent due for the first quarter of the year. Discussions are being held with tenants to collect the other 60 per cent; Advanced discussions being held with tenants to represent a further 28 per cent of the amount due. The property giant is in the process of confirming revised payment plans with its occupiers. Currently it is offering tenants monthly rents to the year end.Despite this, ''robust action'' is a threat for those ''large, well-capitalised'' brands that have not paid rent.27 March 2020Update; Intu have only managed to collect 30% of their rents this quarter day compared to 77% this time last year. Surely they cannot survive in their current form.Intu, one of the largest shopping centre owners in the country, has warned that it is likely to go bust unless it can raise more finance. This is not really that surprising as Intu, which owns Lakeside, Trafford Centre, and the Metro Centre was already in a difficult place due to falling rents in its shopping centres and the need to write down the value of its assets by £2bn . The company has a large debt of some £5bn that needs to be refinanced and recently announced losses of £2bn. In January, the firm approached its shareholders to ask for more money amid the downturn in the retail sector.Last week Intu said it was at risk of breaching debt covenants after it was forced to abandon the fundraising attempt. It said "extreme market conditions" deterred investors from giving fresh cash. To try and offset this they have been trying to sell their shopping centres. But really, who will buy them now?Intu owns the following centres:Braehead, Glasgow Broadmarsh, Nottingham Chapelfield, Norwich Derby Eldon Square, Newcastle Lakeside, Essex Merry Hill, West Midlands Metrocentre, Gateshead Milton Keynes Potteries, Stoke-on-Trent Trafford Centre, Manchester Uxbridge Victoria Centre, Nottingham WatfordCentres run as joint ventures:Manchester, Arndale St David's, Cardiff The Mall, Cribbs CausewayIntu has been particularly badly hit by the high profile failures of the Debenhams, House of Fraser, BHS and New Look to name a few.The demise of the High Street, and now possibly the Shopping Mall, is a big worry for local councils and landlords that are losing out on rents and business rates. The virus is likely to impact footfall across the whole country. No doubt that there will be calls to tax the internet delivery giants as they are now disproportianally benefitting from the situation!
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Prezzo’s CVA strategy appears to be working
I recently read an article in The Caterer , indicating that Prezzo is doing the right thing regarding its CVA being approved by its creditors - Their losses have been halved.It left me thinking, what should directors do once a CVA has been approved? Well, quite frankly, they should follow Prezzo's example. Yes, Prezzo is a big chain of restaurants but, what the directors are doing, in reality, any director can do in some form or another. So, what is it that is being done? In my view there are 3 fundamental things:Change Change ChangeOk, that is a bit flippant but lets look at it more closely.After the CVA was agreed Prezzo changed the management team by appointing Executive Chairwoman, Karen Jones. In small businesses it may not be that easy to change in this way, but management really should consider changing their structure. Perhaps responsiblities could change, maybe someone should be let go or even promoted? Change the strategy or focus on fundamentals. Karen Jones said the company was now focused on ensuring customers left wanting to return after a period where a “strategy of new openings and new concepts distracted from its mission of hospitality”. In hindsight that seems so obvious, a returning customer is worth so much more as you do not have to spend loads of money to get them back. Change your financial controls. The company's directors will need advance notice of any problems and the rigour of the process means that they must have good management information. Poor financial records is the principal reason that companies become insolvent.Investing in the future is the next big thing. Finding new money to carry out change can be a challenge. Debt for equity swaps can work in larger businesses where the lenders see an opportunity down the road. Debt relief can increase working capital by improving cashflow. In smaller businesses, creditors like to see that directors and stakeholders are putting money in. So, maybe sell some assets or try to raise other sources of finance. Lenders will lend to companies in a CVA as long as they are happy that the changes mentioned above are happening and any forecast is realistic.If you want to know how we can help businesses then give us a call on 0800 970539
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Bury FC Delay CVA despite Winding Up Petition
Manchester based football club, Bury FC, have requested more time for them to consider a rescue plan.The newly promoted club are experiencing financial difficulties and received a winding-up petition from HMRC, due to unpaid debts, adjourned at the High Court in June, for what would be the third time in a few months.The club were given six weeks to sort out their future. Steve Dale, owner, was encouraged to use the insolvency mechanism of a Company Voluntary Arrangement, to settle the club’s hefty debts. He, himself stated in April, that the club’s financial situation was ‘’significantly worse’’ than he thought, when he took over.Only yesterday (9th July), during a meeting with the Giggs Lane Club’s creditors, was the CVA decision postponed for a further six weeks. Despite their promotion to League One last season, if creditors agreed to the deal, the Shakers would face a 12-point deduction.Inquesta Corporate Recovery & Insolvency are the potential supervisors for the proposed CVA. The director, Steven Wiseglass said: ‘’The creditors have adjourned their decision pending further negotiations and are scheduled to meet again on Thursday 18th July. We continue to work closely with the club, its director and the creditors to try to ensure a successful outcome.’’Additional to the financial issues, Bury FC have been in dispute with Manchester City, who are to serve them a notice to leave their Carrington Training Ground. Manchester City allowed the Shakers to use their training ground since 2014, when they moved into a new City Football Academy. According to Manchester City Bury FC have failed to meet their obligations in the deal, regarding maintaining the buildings and pitches and numerous break ins have occurred. Once the notice is served, City would allow Bury until October, to find an alternative training facility.What is the future going to be like for Bury FC? Will they be rescued? Or will they face further challenges? What do you think? Comment below…
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