Mar 23, 2016
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UK retailer BHS's rescue plan backed by creditors

Mar 23, 2016

British department stores group BHS has won support from its creditors for a rescue plan that should allow the retailer to stay in business thanks to big cuts in its rent bill.

The 88-year-old firm, hit hard by intense competition in the retail sector, said on Wednesday creditors to BHS Limited, which covers 125 of its 164 stores, had voted to approve its proposal for a company voluntary arrangement (CVA) - a form of compromise agreement to avoid administration or liquidation.

The CVA was supported by more than 95 percent of creditors, above the 75 percent required for the proposal to succeed.

"The renegotiated rents at BHS's loss-making stores will drastically improve the financial viability of BHS, giving the group the necessary financial flexibility to invest in the future of the company through resetting, refocusing and rebuilding the business," the firm said.

BHS said in a later statement that creditors to BHS Properties Limited, which represents 23 BHS stores, had also voted to approve the CVA.

BHS still has some issues to work through, however. It has a pension fund deficit of more than 200 million pounds ($283 million) at its last valuation in 2014 that is still to be resolved.

The CVA, outlined by BHS's owners earlier this month, proposed that 77 of its most viable stores would be retained at current rents, though paid monthly rather than quarterly, for three years, while a further 47 stores would have a reduced equivalent monthly rent of either 75 percent or 50 percent.

BHS's remaining 40 stores would continue to trade for a minimum of 10 months while negotiations with landlords were held on a reduced equivalent monthly rent of 25 percent. Stores would remain open where these rent reductions were negotiated.

The development comes a year after buyout firm Retail Acquisitions, a collection of little known investors, acquired the loss-making chain from billionaire Topshop owner Philip Green.

$1 = 0.7071 pounds

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