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Blacks Leisure plc - Company Volumtary Arrangement approved by creditors.

10 February 2009

The Daily Telegraph, The Draper etc report that the company voluntary arrangement for Blacks Leisure plc was accepted by the landlord creditors yesterday.

Under the scheme the landlords of 101 closing stores will receive 6 months rent and rates, this allows them time to re-let the properties and hopefully find stronger covenants.

Once again BBC reporters got it wrong, on text last night the deal was reported as a "compulsory voluntary agreement"! By today that had changed to "company voluntary agreement", still wrong but closer. Keep at it guys you may get there.

Here is an extract from the Telegraph article:

"Some 98pc of landlords approved Blacks' proposed Company Voluntary Arrangement (CVA), which means that the retailer can exit 89 under-performing stores. If the landlords had not passed the CVA, Blacks would have missed out on bank funding and would have had to enter administration.

"It is a massive relief," said Neil Gillis, Blacks' chief executive. Blacks will still pay around six months of rent for the closed stores.

Richard Fleming, UK head of restructuring at KPMG and "supervisor" of the CVA, said: "This is a pivotal moment in the turnaround of Blacks. Without the approval of the CVA, the company faced administration, putting 4,300 jobs and 291 trading stores at risk. As the third CVA of a large company agreed this year, we could well see CVAs becoming a viable and common alternative to administration."

However, Liz Peace, chief executive of the British Property Federation, which represents landlords, argued that the property sector bears all the pain in a CVA".

That last comment is interesting, it is made because these CVA's put forward by KPMG and others seem to focus on one class of creditors, the landlords of unwanted stores.

Most CVA's include ALL unsecured creditors as well as the landlords. But in this case and that of JJB Sports for example, the suppliers, tax man and other landlords of retained shops get 100% of their debts, the closed store landlords get a small dividend.

How long will it be before landlords reject these proposals and demand that ALL unsecured creditors share the pain?

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