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What is a CVA (Company Voluntary Arrangement)?

The Original Factory Shop Looking at a CVA

in A guide for redundant employees in administration or insolvency situations Retail What is a CVA (Company Voluntary Arrangement)?

The Original Factory Shop (TOFS), bought by Modella Capital just four weeks ago, is working with advisers at Interpath on a potential company voluntary arrangement, Sky News has reported.​Modella is looking at a CVA in order to close underperforming businesses and impose rent reductions on others.Potential reorganisation suggestions are also believed to include a significant distribution centre.There will undoubtedly be some job losses among TOFS's employees, which was estimated to be around 1,800 at the time of last month's takeover, if any so-called "landlord-led" CVA caused store closures. What is a landlord led CVA? A CVA allows the company to terminate its liabilities under a lease provided that the majority of creditors by value (75%) agree. Landlords who do not have large arrears or rent owed to them are permitted in law to vote to the value of only 12 months rent.  In the majority of cases, landlords make up a small proportion of the total debts so they are routinely out voted by suppliers, HMRC etc.This explains why many retailers use this as a way of reducing rental costs as they can make up a high proportion of the companies costs but not their liabilities. So in other words they can get rid of loss making stores and not be on the hook for the 5 year lease.  By applying pressure on landlords, by threatening a CVA, they can get rent reductions on premises that might otherwise have to close.TOFS, which sells beauty brands such as L'Oreal, the sportswear label Adidas and DIY tools made by Black & Decker, has about 180 outlets.​​We will keep this page updated once we know more.

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The Original Factory Shop Looking at a CVA

Quiz Clothing In Administration Rumours

in A guide for redundant employees in administration or insolvency situations News Retail What is a CVA (Company Voluntary Arrangement)?

Update 20th FebruaryIt has been confirmed that Quiz has gone into administraton with the loss of approximately 200 jobs.  23 stores will close.Sky News has reported that Quiz, which is chaired by the former JD Sports chief Peter Cowgill, is lining up Teneo as administrator in a move expected to take place before the end of next week. According to reports, Quiz is purportedly looking to close up to one-third of its stores in order to stabilise its struggling business and reduce costs.The fast fashion chain, which now employs about 1,500 could lose hundreds of jobs as a result of the move, which was lead by the founding Ramzan family.Quiz has hired restructuring specialists at Teneo to investigate its possibilities. Quiz is scheduled to delist from the London Stock Exchange's AIM market and return to private ownership after a shareholder vote earlier this month.Possible actions to help with the closures include a company voluntary arrangement (CVA) or pre-pack administration.A person familiar with the matter told the Telegraph who originally broke the story that "nothing is being ruled out," and that a decision is anticipated in the upcoming weeks.Since taking over as CEO in March 2023, Sheraz has reportedly concentrated on reducing expenses by selling off the chain's underperforming locations.With only £2.3 million in liquidity, including £400,000 in cash reserves and £1.9 million in undrawn banking facilities, Quiz disclosed in the lead-up to Christmas that it was on the verge of going bankrupt.Sheraz's father, Tarak, who started Quiz in 1993 with just one store in Glasgow, gave the business an emergency loan of £1 million last summer. Quiz is now frantically looking for additional finance, probably on harsher conditions, as HSBC is apparently unwilling to continue backing the company.In contrast to its £2.3 million profit the year before, Quiz reported losses of almost £7 million last year. The job of leading the retailer through its turnaround has been placed on chair Peter Cowgill, a former manager of JD Sports.In the upcoming weeks, a formal announcement on the company's future is expected.With Poundland and now Quiz are we going to see a string of retail failures?  At least a CVA gives the company a good chance of continuing to trade

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Quiz Clothing In Administration Rumours

Poundland in CVA rumours

in A guide for redundant employees in administration or insolvency situations News Retail What is a CVA (Company Voluntary Arrangement)?

Sky News has reported that Polish-based Pepco Group, which has controlled Poundland since 2016, has recruited AlixPartners, the retail experts, to handle a sales dip that has prompted worries about company's future.  The company operates over 850 sites and employs 18,000 staffLike for like sales were down 7.3% over the crucial Christmas period.AlixPartners is understood to have been formally engaged last week, with options including a company voluntary arrangement (CVA) or restructuring plan said to have been discussed by a range of advisers on a highly preliminary basis.In its trading statement, Pepco said that Poundland had suffered "a more difficult sales environment and consumer backdrop in the UK, alongside margin pressure and an increasingly higher operating cost environment"."We expect that the toughest comparative quarter for Poundland is now behind us - the same quarter last year represented a period prior to the changes made within our clothing and GM [general merchandise] ranges - and therefore, we expect the negative sales performance for Poundland to moderate as we move through the year."​The company is said to be looking at multiple ways to improve its cash position by selling more goods over £1 to expand its range of products.The mere fact that it has been leaked that a company voluntary arrangement (CVA) has been discussed is pertinent.  The reason is because talk of a CVA can be a very useful tool to put pressure on landlords to consider rent reductions.  Under a CVA the retailer can exit leases, at no cost, leaving landlords out of pocket.  To understand a bit more about this please read our CVA and retailers article.Of course it is also likely that the company will come under extra pressure from the increases in minimum wage, NI increases and the loss of 75% business rates relief.Since the cost of living crisis there has been strong competition from other discounters like B&M and Poundstretcher.  Poundstretcher themselves used a CVA to reduce costs. They exited in 2022 paying just 12p in the £1 to its unsecured creditorsIf such a big retailer were to fail this would send shockwaves through the sector and would be a political headache for the Labour Government.​​

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Poundland in CVA rumours

Wine Rack and Bargain Booze Looking At A CVA

in A guide for redundant employees in administration or insolvency situations Retail What is a CVA (Company Voluntary Arrangement)?

Bargain Booze and Wine Rack off-licences are looking to use a CVA to exit vacant shops according to Sky News ReportsThe shops are owned by Bestway Group, one of Britain's largest privately owned enterprises.  After Conviviality collapsed in 2018, it bought the estate for £7m.One real estate insider said landlords' refusal to compromise prevented the company from exiting the leases.The sources said PricewaterhouseCoopers will lead the CVA before Christmas.Bestway's 200 locations are mostly Bargain Booze and Wine Rack.The threat of a CVA may well put pressure on the landlords to reduce the rent. This is a well known tactic of retailers who need to exit loss making sites. For more information on Retailer CVAs see this page.Bestway operates food wholesale, Well pharmacies, cement, real estate, and United Bank, Pakistan's largest lender.

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Wine Rack and Bargain Booze Looking At A CVA

Tapi Carpets Rescues some stores from Carpetright

in Pre Pack Administration Process and Procedures Retail What is a CVA (Company Voluntary Arrangement)?

Update. 22nd July 2024Carpetright has been rescued in part by its rival Tapi Carpets.  The company will keep 54 stores but 200 are still at risk. The deal will also result in 1,018 job losses across Carpetright’s Purfleet head office and its remaining 218 UK wide stores.PwC administrators who are handling this administration, said that some HQ employees will be retained for a short period to help in the winding down procedure.Retail Gazette share more. Flooring specialist, Carpetright, has confirmed it has filed a notice of intention to appoint administrators.This notice allows breathing space of ten days, whilst a rescue line is sought. If no rescue is found in the period, insolvency is likely.This comes as the flooring retailer faces trading difficulty with increased competition and a fall in demand.Expected outcomes, should a rescue deal be made, are a pre-pack deal or a company voluntary arrangement. These options would potentially leave customers, suppliers, subcontractors and landlords out of pocket,  result in store closures and leave 1,852 jobs at risk.The firm are however working towards a reprieve - hoping to secure additional funding to see them out of the red.This is not the first time Carpetright has hit the news for trading difficulty. Recent events:Teneo were appointed in April to explore cost-saving measures for the loss-making chain In April there was a financial strain placed on Carpetright when a cyberattack left it unable to trade online and in-store for almost a week In June it was reported that the retailer were looking to axe more than 25% of its head office staff as it looked to streamline operationsCarpetright has 272 UK stores and employs over 3,000 staff.

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Tapi Carpets Rescues some stores from Carpetright

Cineworld Looking At A CVA

in A guide for redundant employees in administration or insolvency situations Retail What is a CVA (Company Voluntary Arrangement)?

According to information obtained by Sky News, the movie chain and its advisors at AlixPartners have started formally investigating a company voluntary arrangement (CVA).  This is following earlier reports that the company was seeking a sale of the business.The Cineworld chain is a global business that went into Chapter 11 bankruptcy protection in the US back in 2022.  It has now emerged from that and much of its debts have been swapped for equity.  So it seems that many investors are still keen to be part of it.In the abscence of any sort of sale a CVA is the companies best chance of reducing its overheads as it enables it to exit non profit making cinemas.  It can also help restructure its unsecured debts provided that the creditors agree to its proposal.  75% by value of those that vote will need to support any proposal.The company has more than 100 sites in the UK, including the Picturehouse chain, and employs thousands of peopleIn a statement issued to Sky News earlier in the month, it said: "Like many businesses, we are continually reviewing our UK operations."It is also worth pointing out that this years film releases have underperformed.  Furiosa, Fall Guy, Civil War, Planet of the Apes have been well below expectations.  This is probably a combination of high ticket prices, streaming competition and lower quality compared to previous years..

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Cineworld Looking At A CVA

Island Poke rescued by Pre-Pack Sale

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

27 June 2024White Rabbit Fund has acquired full control of Grab and Go brand Island Poke, in the form of a pre-pack administration.White Rabbit has backed the brand since 2016.The pre-pack sale safeguards 104 hospitality jobs and supplier operations, according to reports.Read more via Restaurant Online.28 May 2024Grab-and-go brand, Island Poke is preparing for a company voluntary arrangement (CVA), in efforts to restructure its business.Two partners of Begbies Traynor were appointed to support the restructuring. They submitted a CVA application to the court on Wednesday.Island Poke, the heath food chain, is coming up to almost 10 years of business. Initially it opened as a street food stall but later in 2015 its first brick and mortar site was opened, this being in Soho. Now the group has 17 UK sites to its name, along with 10 French sites, run under a franchise.A spokesperson for the brand explained how the core of the business is profitable, but the debt left from COVID was a key reason for its struggles.‘’The CVA proposal will strengthen the company and allow us to focus on providing fresh, healthy poke to our customers.’’This is not the first food chain to look into the CVA route. It has been used by many, as a way to determine lease obligations, perhaps propose a deal to cut rents, but ultimately improve the company’s cash flow. It typically is used as a turnaround plan, to bring hope for struggling businesses of a rescue.Read more on CVAs including the process here. At Company Rescue we are experts in this mechanism.

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Island Poke rescued by Pre-Pack Sale
superdry logo

Superdry Creditors Vote in Favour of Restructuring Plan

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

Update: 11 June 202499% of Superdry creditors have voted in favour of the proposed restructuring plans to rescue the fashion retailer.The proposed plan includes a delisting from the stock market, achieving rent reductions at 39 of its 94 UK stores and an equity raise underwritten by founder, Julian Dunkerton.This is a restructuring plan under part 26 of the Companies Act Update: 15 April 2024It hits the news today that landlords of Superdry are considering a restructuring deal that would result in steep rent cuts at a large proportion of its 94 British shops. The scale of the rent cuts would be dependent on the financial performance of each site.According to City sources, the fashion retailer is not planning on any permanent closures, but landlords would have the option to terminate any leases if they were not satisfied with the terms of the deal.Superdry has been facing red for some time. Most recently there were talks with founder, Julian Dunkerton regarding a takeover, but such talks were then aborted.Sky News share more. Update : 29 January 2024In line with other retailers Superdry has been finding trading difficult due to the cost of living crisis.  It has also been cutting back its store count. The clothing brand has 104 stores in the UK and started closing some back in July 2023.  The company also announced that it was looking at costs savings of some £40m.  This is an increase from the £35m they announced recently.  There are now rumours circulating that the company is looking at a Company Voluntary Arrangement (CVA) as a way of cutting costs.The CVA is a powerful rescue tool that is particularly favoured by retailers due to is ability to allow companies to vacate properties and determine their lease obligations.  The cost of high rent shops on long leases can be a heavy burden on retailers.The following case law has been used for some years now to terminate leases with no cash cost to the company.Re: Doorbar v Alltime Securities Ltd (1995) BCC 1149 stated that landlords can be bound by voluntary arrangements for future obligations under a lease.Re: Cancol Ltd (1995) BCC 1133 that the word ‘creditor’ in r1.17(1) IR 86 was wide enough to include a landlord with a right to future rent i.e. the ability to include future rent extends to CVAs as well as Individual Voluntary Arrangements.Furthermore, where the unliquidated or unascertained claim in a CVA involves future rents accruing to a landlord, the case of Re Park Air Services [1996] BCC 556) gives the CVA meeting   chairman some considerable guidance as to quantifying the claim at the meeting.Another reason that Superdry is finding itself in difficulty is that it rapidly expanded to try and become a global super brand.  No doubt much of this expanision was fueled by cheap debt and as many companies are now finding out when interest rates rise and customers pull back the going gets very tough.  As such the shares have lost almost 90% of their value in the last 12 monthsSky News has reported that PWC are the advisors that are looking at restructuring options.It is quite standard practice to put out stories about a possible CVA as this does prepare the ground for negotiations with landlords.  They will be asking the landlords for substantial rent reductions in order for them to survive.  If landlords refuse then they can usually get other suppliers and trade creditors to support a CVA proposal and out vote them.Landlords have tried to challenge CVAs in the courts on the grounds that they unfairly prejudice their position but have so far failed to succeed. 

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Superdry Creditors Vote in Favour of Restructuring Plan

Everest To Go Into Administration

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

ReSolve administrators were appointed on Friday to oversee the operations of Everest 2020 Ltd. They will look for a buyer to save all or a portion of the company.More than ten years ago, after it needed a reorganisation, the specialised double glazing company was purchased by British venture capitalist Jon Moulton's investment firm Better Capital.Afterwards, the Covid-19 outbreak struck Everest especially hard; as a result, Better Capital put the company in a pre-pack administration in June 2020, sparing hundreds of jobs.Everest operated a manufacturing facility in Treherbert, Wales, in addition to its headquarters in Cuffley, Hertfordshire.

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Everest To Go Into Administration
law books

CVA Case Law Created By A KSA Client – Thomas Vs Ken Thomas Ltd

in What is a CVA (Company Voluntary Arrangement)?

Thomas Vs Ken Thomas Ltd and the Court of Appeal upheld our clients position.  The case can be summarised as below: The Court of Appeal’s decision in Thomas v Ken Thomas Limited highlights a significant aspect of the landlord-tenant relationship concerning the appropriation of payments made by a tenant in arrears and where a CVA is proposed. Here’s a summary: Key Issue:The case dealt with whether a landlord can appropriate (allocate) a tenant’s payment towards rent for a period other than the one specified by the tenant. The court examined the implications of accepting payments from a tenant who has specified the payment to cover rent for a particular – in this case one month in advance - period. Facts:Ken Thomas Limited, was a medium sized loss making haulage contractor requiring a turnaround. It approached KSA to oversee a CVA led restructure. It leased over 1million square feet of logistics premises  from Mr. Thomas but fell into rent arrears and became insolvent. It proposed to enter into a Company Voluntary Arrangement (CVA).  During the CVA construction/ preparatory period, our KSA operations director, Iain Campbell agreed with the landlord that the tenant would pay future rent on the first day of each month for that month, whilst arrears were frozen. This was agreed in writing with the company and the landlord. The company offered to pay the monthly rent for December and subsequently for January, specifying the allocation of these payments. Mr. Thomas, however, unilaterally applied these payments to previous arrears and claimed the company was in breach of the lease and sought forfeiture action in the Norwich County Court, which was granted. Decision:The Appeal Court ruled in favour of Ken Thomas Limited, finding that Mr. Thomas had waived his right to forfeit the lease by accepting payments specified for December and January rent, thereby binding himself to the tenant’s appropriation of the rent funds. The court emphasised that a landlord must refuse or return the payment if they disagree with the appropriation specified by the tenant, to avoid waiving their right to forfeit the lease for non-payment.Legal Principle:The case underscores the principle of appropriation in the landlord-tenant context, stating that a tenant can decide how their payments are to be allocated if specified. Absent such specification, the landlord could choose the allocation. Implications:This judgment highlights the importance for landlords to understand the implications of accepting payments from tenants in arrears. It illustrates the need for landlords to be clear about their commercial objectives and the potential consequences of accepting payment against the backdrop of a breach of covenant. The case also led to the common practice of including ‘no waiver’ clauses in leases to protect landlords from inadvertently waiving their rights to remedies for breaches by accepting rent payments. Looking at this case some 15 years later we remember how difficult it was but the company had its CVA accepted by creditors with KSA leading the restructuring project. Our more recent cases are highlighting that many landlords premises are “overrented” post Covid and may need to either be exited using the CVA or have the rent varied by a well written CVA.  We are currently working with haulage and logistics companies recruitment companies, software/tech companies, manufacturing companies and retailers to assist them to reduce fixed costs like rent. If you are a tenant of a commercial premises and your business  needs to restructure, or is considering exiting the lease to support cashflow then you need expert advice. It could be a CVA is the appropriate tool to use. KSA Group helped create the above case law  so you can be sure we know a thing or two about CVAs and properties.

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CVA Case Law Created By A KSA Client – Thomas Vs Ken Thomas Ltd