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Landlords gear up to challenge expected Arcadia CVA

Landlords are likely to set a precedent with a hardball approach to Arcadia’s expected company voluntary arrangement (CVA), as they grow increasingly frustrated with retail restructurings, property sources have told Drapers.

A group of Arcadia landlords, including British Land and Hammerson, are in the process of hiring advisers to assist in restructuring negotiations, signalling their intention to challenge any proposed CVA from the retailer.

“Landlords are frustrated [with retailers],” said one property source. “While this kind of alliance is unusual, they clearly want to make a statement on one of these CVAs to prevent other retailers from doing the same.

“What they’re trying to do is send out a message that they’re not going to roll over.”

Following the recent Debenham’s CVA proposal, and with looming store closure programmes from Monsoon Accessorize, House of Fraser and Ann Summers, landlords are concerned that retailers are misusing CVAs to shrink their debilitating store portfolios.

One property source said: “CVA laws have got to be changed and rapidly. It’s got nothing to do with retail –- it’s all about venture capitalists being able to walk away from debt.

He added: “I don’t think the landlords taking a stand is a bad thing if it stops others abusing it. It’s a massive pressure on landlords if there are two or three of these running at the same time.”

Landlords previously took a stand against House of Fraser’s CVA last year, on grounds that they were forced to accept terms that impacted them more than other creditors.

The challenge highlights retailers need for caution in proposing CVAs, said Emma Shipp, partner and head of business services at Hewitsons law firm.

“Although settled out of court, it demonstrates that those seeking to propose a CVA cannot simply ignore the interests of a body of creditors or propose terms that are significantly burdensome to those creditors without risking a legal challenge,” she said.

“For creditors, it is often the case of making the best of a potentially poor deal, on the basis that something is better than nothing,” she added. “However, landlords feel that they are being unfairly singled out to bear the burden of these CVA cost savings in terms of agreeing rent reductions, providing rent-free periods, waiving rent arrears and ultimately seeing their leases simply discarded.”

However, one property source said landlords must be wary of the alternative outcome: the collapse of Arcadia.

“I think landlords need to be careful what they wish for. I can totally understand them questioning [Sir Philip Green’s] lack of investment, but they need to consider the trajectory of the business.

“In any CVA you need to be relatively bold to [allow the business] to survive.”

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