Will they never learn? After the uproar over the collapse of their former BHS retail chain — which left staff and creditors worrying for their financial future — Philip and Tina Green are now trying to convince stakeholders there will be less of a pension hole and plenty of equity value in their struggling Arcadia group. Almost 200 of their 500 Topshop-to-Burton stores cannot afford the rent, and the pension fund is short of at least £300m. But, having paid themselves more than £1bn in dividends, Sir Philip and Lady Green still expect everyone who’s owed money to approve a deal letting their company off with lower bills.

How could they have thought this would work? Well, it might be because they stopped worrying about the court of public opinion two years ago, and now rely on the court of law. This week, Arcadia filed its company voluntary arrangement documents with a London court late in the afternoon, leaving The Pensions Regulator unable to respond until after News at Ten. As one colleague suggested to Lombard: “Looks like Sir Phil is running rings around the authorities again.” Will they never learn, either?

However, a belated inspection of Arcadia’s CVA suggests the Greens have certainly learnt a lot since 2017.

Back then, after months of political opprobrium and threats of disennoblement over selling BHS with a £570m pension deficit, Sir Philip had to come up with a £363m payout to make a TPR legal challenge go away. This time, he is seeking upfront legal agreement to cut Arcadia’s pension deficit reduction contributions from £50m to £25m a year — by having legal owner Lady Green promise to make up the difference for the next three years. Even independent pensions expert John Ralfe seems to think it a “good deal”. Or at least a good deal better than the BHS debacle.

Back then, Sir Philip had also risked dishonour by claiming there was a future for a BHS chain that he only valued at £1. This time, he is offering lenient landlords 20 per cent of the proceeds if Arcadia is later sold, and suggesting their rent reductions will help to boost the group’s value by restoring earnings to £117m by 2020. That implies a company valuation of nearly £1bn using peer-group multiples. Even the bank negotiating on behalf of landlords calls these CVA terms “substantial improvements”.

But it seems the regulator has learnt a lot since 2017, as well.

Back then, TPR had to settle for a lower BHS pension contribution than it wanted. This time, it appears to be warning that even matching Arcadia’s £50m annual deficit payments will not be good enough. Despite the Greens’ personal guarantee, and an extra £25m sweetener, TPR says: “We do not consider the proposals are sufficient to ensure that members of the scheme are adequately protected.” That suggests it now wants significantly more pension money over a shorter period of time — or has come to doubt the word of a man the Daily Mail calls “Sir Shifty”. With TPR able to influence the way the Pension Protection Fund votes on Arcadia’s CVA plan, and those PPF votes vital to winning the necessary 75 per cent support, it seems the regulator is no longer being bullied in the schoolyard.

Might landlords have learnt something from recent history, and from maths, as well?

A few years back, BHS showed how worthless a high-street retailer can become. And the CVA documents suggest Arcadia is faring little better. Its earnings are down to £30m, implying a valuation nearer £250m of which a 20 per cent share-out is just £50m. That is not worth much to an institutional landlord — and still less after £1bn of dividends have left equity replaced with debt.

Some aspects of the Greens’ CVA plan are innovative, and attractive: a £40m compensation fund for landlords who agree a rent cut but later see their Arcadia tenants trading more strongly. Other features, though, they appear wise to. Sir Philip is trying to show he has learnt his lesson on pensions and business valuations; the trouble is, so has everyone else.

Steel parallels?

Nobody would want their company compared to Carillion, the collapsed government contractor, would they? But commentators discussing the plight of British Steel keep drawing the parallel — in a way that risks reinventing history. A spokesperson for R3, the insolvency body, said the steelmaker could continue trading while in compulsory liquidation, insisting this happened at Carillion and enabled large parts of its business to be saved. Sources quoted in the Times also said the receiver would follow a similar process to that at Carillion. And an ITV news editor suggested the business was “being supported in much the same way Carillion’s has been”.

However, in neither case can the support be portrayed as steely. Carillion’s operations were kept going with government wage guarantees until its contracts could be scattered far and wide. Its business was not kept intact, nor recast — it was scrapped and broken up within weeks.

matthew.vincent@ft.com

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