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BHS creditors to receive 1p in the pound if CVA fails

BHS’s unsecured creditors could receive just 1.23p in the pound if its company voluntary arrangement (CVA) fails, according to new documents published by KPMG.


The department store chain announced it had filed a CVA on Thursday (March 3) in a bid to cut rents on half of its 164-strong portfolio last week, seeking a 75% rent reduction on 40 stores and between 50% and 25% on another 47 stores.

The CVA document said the only options open to BHS are a CVA or administration.

“Your attention is drawn to the estimated outcome statement which shows 1.23p in the £ in an administration scenario and 6.15-100p in the £ in the CVA scenario,” it said.

“The CVA proposal therefore represents a better outcome for BHS Limited’s unsecured creditors (including the landlords) than the outcome on the alternative, which would be BHS Limited going into administration.”

Unsecured creditors stand to lose almost £1.1bn in an administration scenario and more than £1.3bn if the chain falls into liquidation, compared with £132m if the CVA is successful, it said.

Creditors will vote on the CVA proposals on March 23.

The document also revealed that BHS had to fund £25m of letters of credit and £10m of security deposits for its suppliers, whose credit insurance was pulled last year.

It said trading during the three weeks before Christmas was poorer than anticipated in the turnaround plan, placing additional pressure on its ability to trade.

“Without a reduction in BHS Limited’s lease obligations as planned under the CVA proposal, the business does not have the working capital capability to meet its debt and working capital requirements beyond the next rent quarter date.”

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