High Street Retail sales down by up to 50% - Retailer Finance Restructure

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You are here: LATEST NEWS: Retailer Problems?

Are you a retail company with serious financial problems? Rents due for payment and sales too low?

Do you have poorly performing shop units and cannot get rid of the rent and employees?

Talk to us now about how we can help multiple retailers and other types of retail business restructure and cut loss making activity.

We have reports of sales being at 25% of budget for newly opened shops and from 15-50% down on budget even in established sites. At the disposable end of consumer spending, life is very tough in the high street.

Although larger retailers have been reporting a sales downturn for some time; after a poor Christmas and a wet spring, many smaller retailer groups have been suffering in relative silence. Without recourse to shareholders for capital or debt/bond facilities to ride out the storm many such groups are entering protective insolvency, closing stores or trying to survive by restructuring.

Fragility is the order of the day for undercapitalised companies, meeting bank covenants, meeting rent quarter days and paying VAT /PAYE when due are impossible juggling acts to achieve when cash take at the till is below budget.

Whether this will lead to an economic downturn is debatable but consumers are not spending as fast as they were, even with a relaxation of interest rates it may be some time before growth is at previous levels. Maybe we are all taking a bit of a spending “breather” but personal debt levels are at all time high levels and property inflation may stop underpinning this debt/spending.

So how can KSA help a retailer restructure?

Where a retail group has a number of badly performing stores but the remainder are viable/profitable then it is enormously difficult to stop the haemorrhage of cash (even if the bad stores are shut down, rent and overheads are still payable). Normally a retailer can only hope that the landlord will let the company assign or surrender the lease, obviously the landlord’s business requires tenants paying rent, not empty properties. Too many vacant properties could mean that their business model is not viable.

With the inherent power of the lease they will be very unlikely to allow surrender without a price being paid. Even assignment may lead to future problems if the assignee is not financially strong.

Using a company voluntary arrangement (CVA) we have helped companies to exit those non performing properties/shopping centres and terminate the formal lease, thus crystallising the liability. Rent payments are stopped and the landlord can be prevented from taking recovery action.

We are often asked - how can this approach work?

It is vital that the proposals are cogently structured and careful financial forecasts are prepared in support of the CVA proposal, then detailed negotiations must commence with the landlord to seek surrender or termination of the lease, if this is not forthcoming then the company should consider exiting the property before finalising/ publishing the CVA proposal.

KSA helps our clients with deal structure, turnaround management, building the proposals and forecasts, driving the deal with creditors and helping the board through the crisis. Please note that it is not generally necessary for Administration or Receivership to be used for this approach! Thus it is cost effective and powerful with negligible cashflow consequences. Stock and fixtures (as long as not landlord’s improvements) can be used elsewhere in profitable stores.

Talk to Iain Campbell or Keith Steven for more details: 0800 9700 539

Want to know more about KSA?

See here for client case studies. See here for what our clients say about us.

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Contact details for KSA if you are based in London & Home Counties
KSA Turnaround
Tower 42
25 Old Broad Street
London EC1N 1HN

Telephone: 020 7877 0050 Facsimile: 01289 309 429

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Berwick Upon Tweed, TD15 1HE

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