Philip Green’s efforts to save his Arcadia retail empire are on a knife-edge, with a key landlord still opposing a rescue plan with 24 hours left before a second crunch vote.
Intu, the owner of shopping malls including Lakeside in Essex and Manchester’s Trafford Centre, is reluctant to agree to the rent cuts that Arcadia has demanded, according to people briefed on the property group’s position.
“They are still asking for a significant discount which Intu is not prepared to accept,” one person said. “[Intu] would still prefer to take their chances with an administration process where they may be able to secure a better outcome.”
Another person close to the process said Intu represented about 15 per cent of creditor votes. A company voluntary arrangement, the insolvency process that Arcadia is using to reduce its fixed costs, requires 75 per cent approval in order to be implemented.
If other large landlords refuse to back the group, or if smaller creditors do not vote in sufficient numbers, one or more of the seven separate proposed schemes could fail — a result that would probably push Arcadia into administration.
Arcadia could seek a second adjournment, but that would take it uncomfortably close to its next quarterly rent payment date in late June.
Intu declined to comment, as did several other large property owners such as Land Securities, which also opposed the proposed CVA when it was put to an initial vote last week. That meeting was eventually adjourned after more than five hours, pending further talks between Arcadia — whose brands include Topshop, Burton and Dorothy Perkins — its advisers, Deloitte, and creditors.
Since then, Sir Philip and his wife Tina, who is the ultimate owner of Arcadia, have offered to make good a portion of the rent reductions that the group had demanded across 194 out of more than 500 stores in the UK and Ireland.
That proposal would result in the worst-affected landlords facing reductions of 50 per cent in their rent over three years rather than 70 per cent, and would cost the Green family up to £9.5m in the first year if it were accepted.
A second vote is scheduled to take place on Wednesday. Some landlords, such as British Land and Hammerson, have pledged to support the CVA proposals. So too has the Pension Protection Fund, which will cast the votes of Arcadia’s defined-benefit pension scheme because the fund is in deficit.
But the agreement on pension scheme funding reached last week between Arcadia, the Green family, the PPF and the Pension Regulator is conditional on all of the CVAs passing, according to people with knowledge of the deal. The PPF will support the CVA on Wednesday.
One restructuring expert said Arcadia’s borrowing arrangements were also highly interconnected and that the failure of even one CVA could be enough to derail the restructuring.
Arcadia has repeatedly warned that if creditors do not approve the proposals, it is likely to go into administration, putting up to 18,000 jobs at risk in a sector that has already shed 79,000 positions over the past year. In that scenario, the pension fund would be taken over by the PPF and members would face lower payments when they retire.
“Once you have done all the work for the CVA, administration is just a matter of flicking the switch from left to right. They would probably file a notice of intent to appoint administrators straight away,” the restructuring specialist said.
“The first vote was about pragmatism,” he added. “Landlords simply could not agree to those kinds of rent cuts. This one is more about whether they want to give Philip a bloody nose”.
Sir Philip declined to comment.
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