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Retail

Select Fashion Goes Bust But Shops Sold

in A guide for redundant employees in administration or insolvency situations News Retail

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. 

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Select Fashion Goes Bust But Shops Sold

Personal Guarantee on Commercial Leases

in Directors Personal Guarantee – What Happens In Insolvency or Liquidation? Property and Real Estate Retail

Do I have to personally guarantee the lease for commercial property? When a limited liability company takes on a property the landlord will often ask for a third party to guarantee the obligations under the lease which, in the most part, is to pay the rent and service charge.  This is to reduce the risk to the landlord should the company become insolvent.  Most landlords will ask for this guarantee if the company is relatively new, with little trading history, or in a high risk industry.  Many restaurants and hospitality businesses are asked for these guarantees.  It is usually the directors of the company that are asked to personally guarantee the lease.  As a director this means that you are personally liable for the rent if the company can't pay and the landlord can pursue through the courts and could even make you bankrupt. If I can't pay the rent can the landlord make me personally liable under the lease? Simply, If you give a guarantee then yes.  Whether it is commercially sensible for the landlord to pursue you is a different matter.  If you have no assets or the amount is relatively small that you owe then it might not be worth the costs.  A landlord would need to issue a bankruptcy petition and in the end it might be better to concentrate on reletting the property with a tenant that can pay the rent.  Obviously the landlord is only likely to call on the personal guarantee once the company has vacated the property.One important thing to realise is that if more than one person has been named as a guarantor then these people are what is called jointly and severally liable.  What this means is that one person and/or all are liable.  So it might be practicable that the landlord goes after the richest guarantor rather than pursuing each one individually especially if the others guarantors have little money! Can I get out of the personal guarantee I have given to the landlord? If your business has had a strong trading history and paid rent on time over a number of years then at lease renewal it would be a good idea to try and negotiate that the new lease does not need a guarantor.  However, this will all be part of the negotiation and any landlord will be reluctant to give this additional security up.  It might be that you can negotiate limits to the guarantee, such as it can only be claimed on in the first 2 years of the lease (incidently most business failures happen in the first 2 years) or that the guarantee does not include the family home. How can I avoid the guarantee being called upon? If the company is in a strong financial position then the guarantee isn't a problem.  If the company starts showing warning signs of insolvency it is crucial that the directors act.  It is all too common that directors are over optimistic or blind to the signs.  This can seriously increase personal liability problems.So, the basic advice is GET ADVICE if you are worried your company could be getting into difficulty and you have a personally guaranteed the lease.

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Personal Guarantee on Commercial Leases

Harveys Furniture Goes Into Administration

in A guide for redundant employees in administration or insolvency situations News Retail

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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Harveys Furniture Goes Into Administration

Intu warns it could go bust unless it can raise additional finance

in News Retail

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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Intu warns it could go bust unless it can raise additional finance
closing shop

Retailers increasingly turn to CVAs to restructure their businesses

in News Research and Statistics Retail What is a CVA (Company Voluntary Arrangement)?

UK High Street flagging as retailers increasingly turn to CVAs Figures from the British Retail Consortium (BRC) show that the UK high street and retail performance is facing difficulty. In 2016/2017 we saw a sharp decline in performance and it has been stressed that this has continued.This has been borne out in the high number of companies entering administration or seeking company voluntary arrangements (CVAs) within the last 12 months.Here, we'll take a closer look at UK high street performance and the factors causing it to suffer. Firstly, What has happened to high street performance in the UK? These are the key statistics from the latest BRC research:Overall year-on-year (YOY) retail sales fell 2.7% in May 2019 (the biggest decline on record!) Food sales dropped for the first time since June 2016, with further declines in clothing, outdoor goods and footwear 1,566 stores have had to reduce rent amounts Retail & Leisure Parks account for a third of all closures in the UK as a result of a CVA, administration or liquidation Nottingham city centre has experienced the most closures through either a CVA, administration or liquidation Birmingham holds the most closures of all UK Urban Areas. They've had 26 rent reductions and 23 closures since January 2018 Of all the Counties, Greater London saw the greatest damage, by far Footfall was down 1.4% on average over the 12 months to March 2018 As in 2016/2017 figures, the South East saw the most rapid fall in footfall There has been 140 closures and only 6 rescues of retail/leisure operators, since January 2018 To date, May 2019, 24 companies have failed, 743 stores have been affected and 31,250 employees have been impacted.How has this affected specific businesses? Several UK high street retailers have hit the headlines after being forced to take action due to falling footfall, including:Select: Closure of 14 stores, despite 50 being earmarked. Additionally, they have requested for a rent reduction L K Bennett: A notice of intention for Administration was filed, leaving 41 UK stores at risk as well as 480 UK staff affected Poundworld: Saw the closure of almost 200 stores, as they faced liquidation Mothercare: 60 store closures with 77 stores having their rent reduced by 17% Toys R Us: Entered administration after failing to find a buyer, having implemented a CVA New Look: Closed 60 stores and cut 980 jobs after agreeing to a CVA Homebase: A CVA vote, left 45 stores to cease trading with 1500 jobs at riskDespite this, six retailers have been saved. See the cases of House of Fraser, Arcadia, Office Outlet, Patisserie Valerie, HMV and Evans Cycles. What's caused this decline in high street performance? Economic and political uncertainty, falling consumer confidence, changing consumer habits and rising inflation have all contributed to the long-term decline of the UK high street.However, the most pressing factors impacting the retail sector in May 2019 were:1. Low Growth OnlineKPMG's UK retail partner, Paul Martin, stressed: “The extremely low growth online is real cause for concern, especially with almost a third of all non-food sales today being made online. This trend has continued to manifest itself over the last year and requires real focus from the retail community.”2. Business ratesIncreased business rates are potentially the biggest single contributing factor when it comes to UK high street performance.Gary Grant, founder of high street toy retailer, The Entertainer commented: "Landlords are being very realistic about their rent, but the one thing that is not negotiable are business rates."[The retail sector] is seeing many stores empty for long periods of time and the biggest issue is that [retailers] can’t open stores.''“Business rates are out of line now with retail turnover. Business rates are the real killer. Any increase in cost where you have flat and declining turnover is going to put pressure on the bottom line.''“The Government just haven’t got it. They need to take some responsibility for the high street’s decline.”Likewise, Helen Dickinson, OBE, BRC's Chief Executive, states how such rates prevent retailers from ''investing in their physical space. We have a broken tax system, which sees retailers paying vast sums of money regardless of whether they make a penny at the till, and yet the Government is failing to act.''With the UK high street continuing to suffer, it pays to know your options as a company boss. Taking difficult yet decisive decisions at the right times will put you in the best possible position to keep your company trading successfully.If you are worried about declining UK high street performance and the prospect of a CVA, contact the experts at Company Rescue today. Take a look at our site for many useful pages of advice.

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Retailers increasingly turn to CVAs to restructure their businesses

Coast Collapse into Administration

in A guide for redundant employees in administration or insolvency situations News Retail

Coast becomes the latest fashion chain to collapse into administration.Last month, Aurora, Coasts parent company, was searching for a buyer, after the business was hit hard from House of Fraser’s recent difficulties.On Thursday evening, staff were told that all of Coast’s 24 standalone stores will close, with 300 jobs at risk.PwC have been appointed as administrators.Upmarket womenswear rival, Karen Millen have brought Coast’s brand, website and concessions, as well as taking on 600 staff. They’re said to be working with the existing management team to continue to grow and develop the new business.  Though this sale gives a firmer financial footing for Coast, not everything was included in the transaction, leaving 24 retail stores behind.PwC director and joint administrator, Mike Denny, states ‘’The businesses had been facing financial difficulties due to structural changes in the retail space and specifically the concession partner market, as well as a softening of demand for occasion wear.’’Coast operate a number of concessions in House of Fraser stores and so faced a multi-million-pound bill following the department stores £90m pre-pack administration sale. They were not the only fashion brand to have taken a hit, with Ted Baker, Mulberry and Quiz also being affected.

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Coast Collapse into Administration

Betterware goes into administration soon after Kleeneze

in A guide for redundant employees in administration or insolvency situations News Retail What Does Going Into Administration Mean?

Betterware, which sells household items via a catalogue sent to millions of homes, has gone into administration following its sister company Kleeneze.  Betterware employed directly 90 people and thousands of door-to-door selling roles.Betterware said that difficult trading conditions and cashflow problems had been responsible for its demise.The firm started in 1928 when it was founded in east London as a door-to-door seller of brushes and polishes. The catalogue was launched in the 1970s and in 2015 the business was bought by JRJR, a Texas-based consumer sales group.The company relies on thousands of self-employed agents who distribute the catalogue around the country. Many of them have other forms of income to supplement their earnings.Begbies Traynor, the company’s administrator, said that Betterware had ceased trading, with all staff made redundant. “Our aim was, of course, to find a purchaser for the business as a going concern in order to safeguard the jobs, but unfortunately this did not prove possible,” it said.Any parties interested in acquiring assets of the company has been asked to contact the joint administrators Gareth Rusling and Claire Dowson of Begbies Traynor as soon as possible.No details have been given to those who may have ordered goods but have a look at our page on “will I get my goods!”This is what one of the regional managers sent to us to put her side of the story

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Betterware goes into administration soon after Kleeneze

New Look to use CVA to close 60 stores

in News Retail What is a CVA (Company Voluntary Arrangement)?

Updated:New Look is now considering a CVA in order to close up to 60 stores, which represents 10% of its portfolio, after a very tough year in which UK sales were down 8% on like for like comparisons. 980 jobs are at risk. The South African owned business will need the permission of its bondholders. The plan also includes a rent reduction and new lease terms for 393 of its stores.New Look, which is owned by South Africa's Brait, has asked its creditors to approve the proposal by March 21 and all stores will remain open until then. Deloitte is acting as a nominee to the CVA.It has also been reported that the firm had lost its credit insurance from some of its suppliers that will mean that it will have to pay upfront for its supplies.  This has echoes of many other firms that have gone bust where the failure has been precipitated by the withdrawal of credit insurance.New Look ‎is the latest in a series of High Street names to look at trying to reduce the size of their store portfolios amid rising pressures from online and discount rivals, increased living wage and a deteriorating outlook for consumer confidence.Expensive High Street stores can be cut back provided that the lease allows for early termination.  If not the only way out is to surrender the lease that can be very expensive or use a company voluntary arrangement (CVA).A CVA allows the retailer to determine its lease obligations which can greatly help the company's cash flow.Daniel Butters, a partner at Deloitte, said that the CVA “will provide a stable platform upon which management’s turnaround plan can be delivered”.For more information on why a CVA is a perfect mechanism for helping retailers, read our retailer rescue page Why not read our case study where we rescued a multi-store retailer

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New Look to use CVA to close 60 stores

Byron Burgers to Seek CVA As Chain Struggles

in Hospitality News Retail What is a CVA (Company Voluntary Arrangement)?

The Byron Burger chain of upmarket burger restaurants has announced that it will be looking for the support of its creditors by way of a company voluntary arrangement (CVA).  Byron Burgers employs 1800 staff in 70 outlets.  The company is asking for a 55% rent reduction on 20 of its restaurants and to open a dialogue with the landlords regarding continuing trading.This is the latest in a line of businesses such as Toys R US that have been struggling recently and have looked at using the CVA mechanism.    The CVA will allow the company to vacate some of its properties and close its branches which, according to the company, have not performed to expectations.In order for the rent reductions to be binding on the other landlords, they will need the support of 75% by value.  These landlord CVAs are becoming more popular as retailers struggle with high premises costs.Rumours about the business' financial situation have been circulating since September last year when we reported that Byron confirmed it would be closing four of its outlets.Simon Cope, Byron chief executive, said: "Byron's core restaurant business and brand remain strong but the market that we operate in has changed profoundly."In order to continue serving our loyal customer base, we need to make some critical and difficult changes to the size and shape of our estate."CVAs are not popular with landlords as some see it as a way of businesses just dumping unprofitable stores.  However, in order to do a CVA, the company has to be insolvent on one of the 3 tests.  In this case, the business can argue that it is balance sheet insolvent as the ongoing costs and liabilities of the unprofitable stores will make the whole business insolvent.If you are a retailer or hospitality business then a CVA can be a very powerful mechanism to save your business.  See our page on retailer rescue or give us a call on 01289 309431

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Byron Burgers to Seek CVA As Chain Struggles