Landlords and suppliers have raised fresh concerns that the company voluntary arrangement process is being abused after plans by The Original Factory Shop to close 32 shops were voted through.
The CVA proposals, which will lead to shop closures and rent reductions across a large part of the TOFS store estate, were approved by creditors on Monday 9 July.
One property agent, who advises the landlords of some of TOFS stores, said: “When someone’s making a thumping loss you expect to see these things, but in this case it feels like they are just using what they can to make their life a bit easier.
“It is unfair as landlords will get hit financially now, but the owners could then go on to sell the business at a profit.”
A TOFS supplier said: “I am reticent to continue [supplying TOFS]. I will see what happens going forward. I don’t agree with CVAs – it’s like legalised robbery.”
Insurer Euler Hermes has already pulled TOFS cover, and one source added that suppliers may struggle to get credit insurance on orders following the CVA: “A lot of TOFS suppliers have invoice-related finance. If they can’t get insurance on the sale, they can’t get finance on their invoice.
“The CVA will affect liquidity. People will want shorter payment terms of seven to 14 days. However, one positive is [TOFS owner] Duke Street has paid down £10m of debt, so the company is in better shape.”
The Original Factory Shop blamed poor trading conditions for the CVA. The retailer revealed it posted a 3.7% fall in revenues from £190.2m for the year to April 2018 to £183.2m. EBITDA stood at £6.2m, down from £12m in 2017.