Arcadia Group suppliers fear they will not be paid the millions of pounds owed to them if the retailer’s company voluntary arrangement (CVA) proposals are not voted through next week, Drapers has learned.
On Wednesday, Sir Philip Green’s Arcadia postponed its creditors’ meeting until 12 June to “conduct further dialogue with a few landlords”. The group said it has secured the support of the pension trustees, the Pensions Regulator and the Pension Protection Fund, as well as the “full backing” of its trade creditors and a “significant number” of landlords. This afternoon, it revised its rent-reduction demands in a bid to win the support of opposing landlords.
Several Arcadia suppliers told Drapers they had voted for the CVA to go through to “guarantee security of payment” and the employment of thousands of staff. However, many unsecured creditors are now “very nervous” that the vote will not go through next week, and they will not receive the millions of pounds owed to them.
Although some suppliers were able to able to obtain a letter of credit insurance last week, some are still exposed to big losses – Drapers understands that some suppliers are owed more than £10m for both delivered and undelivered stock.
“We really hope the CVA goes through next week because it’s the only lifeline for everyone involved at the moment,” said one supplier to the high street chain. “Nearly all suppliers will be worried about being paid because they are nearly all unsecured and it’s almost impossible to get Arcadia credit insurance.
“Everybody is very nervous. We all believed it would go through this week, but now we are not sure if it will any more.”
He added: “Most suppliers were ‘for’ the CVA. One, for security of payment; two, to guarantee the employment of thousands of people; and three, because the internet has disrupted the retail business and so Arcadia needs a lifeline.”
Another supplier agreed: “I think all suppliers did vote for the CVA and will vote for it again. We think it will go through, but it’s a terrible, frightening situation if it doesn’t.
“It’s the all-eggs-in-one-basket scenario where it could be quite devastating for UK suppliers who have a high percentage of turnover from Arcadia.
“It’s a tremendous risk, as not very many will be able to absorb the costs. Some smaller businesses will ultimately disappear.”
The head of one suppier said: “This CVA is a mass exodus. It will smash all of us creditors and landlords into pieces.
“This will close a lot of businesses and the smaller suppliers will be hit the worst. There are so many that are owed millions of pounds.”
He added: “Although most people don’t want a CVA, it’s the best out of a bad situation for creditors and most suppliers will be voting for it.”
Meanwhile, another supplier who recently pulled out of working with Arcadia after losing insurance cover for Topshop, said: “We might consider working with them again if their business improves, but when a company struggles, they often ask for some kind of discount or might threaten to cancel orders.
“There are a lot of trust and faith issues that are very rocky on the retail side of things right now.”
Arcadia has been contacted for comment.