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Monsoon CVA proposal revealed

Monsoon and Accessorize have launched company voluntary arrangement (CVA) proposals in an attempt to return the businesses to profitability and growth.

Ian Wormleighton and Matt Smith of Deloitte have been appointed as nominees to the CVA.

The CVAs call for rent reductions at 135 out of a total of 258 Monsoon and Accessorize stores. No store closures are proposed.

Monsoon and Accessorize are also tabling a series of additional proposals including a profit-sharing scheme whereby landlords will receive up to £10m if the companies trade profitably and above forecast in future years.

As part of the CVA proposals, Monsoon and Accessorize’s owner Peter Simon has already provided an emergency £12m facility on a secured basis and agreed to provide a further unsecured credit facility of £18m at 0% interest, to enable the turnaround plan to be implemented. The £18m of new money is conditional upon the CVAs passing and not being subject to a successful challenge.

Simon has also agreed to reduce the rent on Monsoon and Accessorize’s head office in west London by 50% – a building owned by another business he controls – to help the companies in their drive to reduce overheads.

The full proposals are being distributed to creditors today and the companies will seek creditor approval on the proposals at a meeting to be held on 3 July.

Paul Allen, CEO of Monsoon Accessorize, said: “Trading for the group has been difficult for some time, as it has been for much of the retail industry. This because of a combination of factors, including rising costs, increased competition and subdued consumer spending.

“In early 2016, we implemented a plan that initially delivered positive like-for-like store sales. However, in the two years that followed, overall like-for-like sales have decreased as market conditions declined.

“As a result, we are now taking further action to reshape the businesses for the future. Although the group has no external debt, the current rate of sales decline and recent working capital pressures have had a material impact on the group liquidity position, particularly at the low point in the working capital cycle during the financial year.

“The proposed CVA is designed to reduce store-operating costs and to bring the costs more in line with market rents. Through implementing the CVA and the shareholder credit facility, the group will be able to invest in the business and the brands, and in growing profitable sales channels – both in stores and online.

“We have made great strides in improving Monsoon and Accessorize’s marketplace offer, and own web propositions, which continue to grow, and which demonstrate the underlying strengths of both brands. A continued focus on these channels, together with a reshaping of our store estate, is key to the future success of the business. We believe that the investment proposed in our turnaround plan will help to deliver a sustainable and profitable business moving forward.”

Deloitte administrator Wormleighton said: “We have supported the group in its engagement with key stakeholders ahead of today’s announcement, and believe that these CVA proposals strike a fair balance between the concerns of key stakeholders and the essential requirements to restructure the business.”

Ian Fletcher, director of finance and commercial policy at British Property Federation (BPF), said: “These situations are never easy, as property owners need to take into consideration the impact on their investors, including those protecting pensioners’ savings via investment into property, as they vote on the CVA proposal.

“Monsoon and Accessorize engaged with the BPF before launching its CVA proposal. This has provided us an opportunity to improve understanding of property owners’ interests and concerns, but ultimately it will be for individual property owners to decide how they will vote on a CVA.”

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