Blue Inc’s company voluntary arrangement (CVA) has been approved by more than 80% of creditors.
Blue Inc filed for a CVA earlier this month to enable it to shut unprofitable stores and reduce rents. The move came just over a year after the retailer went through a pre-pack administration.
Begbies Traynor, which acted as joint supervisor, said the proposal received “strong support” from over 80% of creditors voting, and was unanimously approved by those shareholders who voted. The firm’s two biggest creditors – Barclays Bank, to whom it owes £5m, and a supplier, Padma Textiles, to whom it owes £4.8m, voted in favour of the CVA.
Kirstie Jane Provan and Gary Paul Shankland of Begbies Traynor are now the joint supervisors of the company and the CVA process.
The process is expected to take just under four years, according to documents seen by Drapers. The retailer wants to close 34 of its 127 stores, resulting in 245 job losses.
Blue Inc said the underperforming stores have delivered “minimal contribution to central costs” and “drained vital finance” from the business. It added that the cost reduction of £6.5m as a result of exiting the stores will increase net margin and improve stock optimisation. Stock levels are currently £2m-£3m short.
Under the terms of the CVA unsecured creditors will receive 36p in the pound.
The company’s directors said the primary concerns were the instability of the store estate, a lack of trade insurance, reduced credit terms and a lack of deferment for import duty and VAT.
They said they are committed to continuing to drive the business forward to deliver long-term profitability and growth. They added that the CVA forms part of a wider organisational restructuring and the store rationalisation will ensure the future financial stability of the company.
Blue Inc has already agreed a deal to outsource its warehousing and logistics operations, which has saved it £800,000 a year.
One Blue Inc landlord was hopeful the CVA would work: “If you read any research on the clothing industry it says that menswear should see growth over any other category. I’d like to think there is a good chance for a well-run menswear fast fashion chain to have a viable future.
“I hope the new management team really invests in Blue Inc as there is a gap in the market for that kind of business.”
Steven Cohen left his position as chief executive of Blue Inc in October 2016 after 11 years. Hezi Yechiel and Miraj Khan from Padma Textiles, one of Blue Inc’s biggest creditors, are now joint chief executives. Peter Girt is managing director, Jamie Bakehouse has been promoted to trading director and Ketan Damani is finance director.
Administrators from Leonard Curtis were appointed to Blue Inc subsidiary A Levy on 19 January 2016, resulting in the closure of 76 Blue Inc and Officers Club stores and the loss of an estimated 580 jobs. Blue Inc bought parts of the business back that same day, saving 1,500 jobs across its remaining 157 stores.