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Monsoon Accessorize creditors have given the green light on the retailer’s CVA plans which will see over half of its stores receive rent reductions.
The reductions, which were proposed last month, will see cuts to rents of between 25%- 65% across 135 out of its 258 stores after the retailer revealed current costs were “unaffordable, given the fundamental changes that have taken place in the retail sector”. No store closures are to be expected as a result of the plan.
Landlords were also incentivised to vote for the CVA after being offered up to £10m as part of a profit-sharing scheme if the CVA leads to the company trading profitably and above forecast.
Paul Allen, CEO of Monsoon Accessorize, said: “We would like to thank our suppliers and landlords for their continued support. This action will help us to reshape our businesses for the future. We will now turn our attention to the wider turnaround plan, and delivering a sustainable and profitable business moving forward.”
The news comes after a series of CVA across the high street with most recently Philip Green’s Arcadia going ahead with a restructure of its stores, closing around 23, as a result of a CVA.
Commenting Stephanie White, associate and real estate expert at Stevens and Bolton LLP, said that following the Monsoon agreement the volume of CVAs in the UK must be managed “carefully”.
She said: “Monsoon’s landlords have backed the turnaround plan even though some of their rents will be slashed as a result. Landlords may have been persuaded to give their support to the CVA by the profit share that Monsoon offered, and it might become an expectation that tenants seeking CVAs in the future will offer similar sweeteners.
“Monsoon follows Arcadia and Debenhams who also won the support of their landlords to join a growing list of retailers using CVAs. For some retail landlords though, the volume of CVAs must be managed carefully.
“Whilst landlords will want to support their tenants to return to healthy trading, they have to balance their own books too, and landlords are coming under increasing pressure as the list of tenants protected by CVAs keeps growing.”
