It has been reported by The Telegraph that JJB Sports is proposing a company voluntary arrangement (CVA), which would mean that it will close 45 loss making stores to try and save the company.
JJB Sports last entered a CVA in April 2009, which allowed it to continue trading after walking away from leases on 140 stores.
CVAs have angered landlords as they dislike the fact that it means that the retailer can walk away from leases which underpin the value of their properties. However, the landlords would still receive a percentage in the pound of any rent that was outstanding and of course they can always relet the property! However in some cases the CVA mechanism has been used not primarily for saving the company but for terminating lease agreements on unprofitable stores and the landlords have been rightly upset.
In order for the CVA to be approved 75% (by value) of the creditors must agree to the proposal so the support of their landlords is seen as crucial. However in last ditch efforts by the company it has reportedly said that if a CVA is not approved then the business will have to go into adminstration. If that were to happen then the return to unsecured creditors would be no doubt less than if it went into a CVA.
This latest move follows months of falling sales and a recent bid to raise £31.5m from its two largest shareholders. It has also been targeted by JD Sports which is looking to aquire the company.
If you are affected by the proposals as an employee then please look at our help for employees page.
If you are a retailer and would like to know how a CVA could save your business then take a look at our pages for retailers.