Could a CVA be the answer to restructuring your Retail Business?
Over recent years we have seen many great British Brands disappear from the high street and, following this worrying trend, two more have been added to the list with Toys R Us and Maplins recently announcing closures.
Shopping habits have changed. Consumers are spending less in shops and are preferring to buy online instead, with one pound in five now being spent with online retailers.
Retailers tied in to onerous leases may be able to use a Company Voluntary Arrangement (“CVA”) as a means of restructuring their business and ultimate survival.
BHS employed a rescue strategy involving negotiations with their landlords to buy them some time. Whilst it didn’t work in the long term for them, a CVA could potentially help other high street chains survive while they adjust their services to be in line with modern buying trends.
A CVA is similar to a personal Individual Voluntary Arrangement (“IVA”), and allows a company with cash flow, or debt problems, to reach an agreement with its unsecured creditors regarding repayment of all, or part of its debt it full and final settlement, over an agreed time period. CVAs may not be openly welcomed by some creditors as the payback period can be up to 5 years. However, they can and do work in many instances.
Retail companies need to develop the whole shopper experience in order to survive. Developing a ‘Bricks and Clicks’ multi-channel approach can help reduce reliance on footfall through the door. Engaging and personal relationships with customers need to be created. Strategies that are costly to develop, and the high costs associated with a physical high street presence, could prevent these companies creating services that suit modern buying trends.
Entering a CVA can enable companies to ringfence some or all of their debts, giving them more time to cultivate their online presence, and renegotiate or offload some of their more onerous leases.
If you would like to find out more about how a CVA could help your business, please download our useful guide on Voluntary Arrangements or get in touch with us.