Embattled sports retailer JJB Sports has disclosed terms of its proposed CVA, which is seen by management as key to the retailer’s survival.
JJB intends to shut 43 stores on or before April 24 next year, and to keep another 46 under review until the same date in 2013.
The retailer will pay landlords 50% of the contractual pro rata monthly rent ahead of closure and other sums.
Crucially, and in response to landlord disquiet at the retailer’s second CVA in a space of two years, JJB will make a further payment of between £2.5m and £7.5m in cash or shares to landlords “compromised” by the CVA. The exact amount will be linked to the company’s market performance.
All of JJB’s stores will also move to monthly rents for the next two years.
The CVA must be approved by creditors and shareholders at meetings on March 22.
JJB chairman Mike McTighe said: “JJB’s restructuring plan is on track. Last week we completed the first capital raising to provide short term finance for the group and delivered our revised business plan to Bank of Scotland.
“Today we are laying out the full terms of our CVA proposals and preparing the way for creditor and shareholder meetings later this month.
“In formulating these CVA proposals we have talked to our landlords and listened to their views.
“Before the shareholder and creditor meetings, we intend to release details of the anticipated funding requirements of a restructured JJB and our new business plan, together with the key terms of our second capital raising that will deliver the longer term financing required to enable the group to move forwards on a far sounder footing.
“There remains much to be done, but we have achieved some significant success in recent weeks, and are hugely grateful to all our key stakeholders who have shown us so much support. With their continued backing we remain confident about the future of this business.”
KPMG UK head of restructuring Richard Fleming, the proposed supervisor of the CVA, said: “The CVA gives the company a chance to avoid administration and carry out a fundamental restructuring of its property portfolio.
“A CVA must always offer a better return to creditors than administration and in the case of JJB we estimate the return to compromised landlords to be within a range of 24.6p to 29.2p in the £1 versus 1.1p in the £1 in administration.
“While CVAs have come in for criticism, we believe they offer a more socially responsible alternative for companies in distress.”
JJB also intends to move its listing from the main market to AIM.