Creditors of UK-based fashion and accessories retailer Monsoon Accessorize Limited and Accessorize Limited have approved its company voluntary arrangement (CVA) proposals.
Under the proposals, which were outlined on 20 June, Monsoon Accessorize was seeking rent reductions at just over half of its 258 UK store estate. It said current rent and occupancy costs are unaffordable given “fundamental changes” in the retail sector, and that it needs to reduce the costs of its store portfolios “to ensure their ongoing viability.” However, “no store closures are currently planned within these proposals.”
As part of the deal, landlords were offered a share in future profits worth up to GBP10m (US$12.7m) annually if the retailer can “trade profitably and above forecast” in future years.
In a statement following yesterday’s vote, Paul Allen, CEO of Monsoon Accessorize, said the action “will help us to reshape our businesses for the future, and we will now turn our attention to the wider turnaround plan and delivering a sustainable and profitable business moving forward.”
A CVA is a controversial insolvency procedure that allows a company to reach a voluntary agreement with its business creditors to repay its debts to avoid going bust. But they have been criticised by landlords who claim retailers are misusing them to cut costs by renegotiating rents.
One of the most high profile cases has been that of Arcadia Group, owner of the Topshop, Topman, Miss Selfridge, Burton and Dorothy Perkins chains, which last week avoided falling into administration after its creditors approved all seven of its CVAs.
However the retailer was forced to revise its request for a 30%-70% cut in rents after a battle with landlords. Rent cuts were instead agreed at between 25%-50%, with the group’s majority shareholder, Sir Green’s wife, Lady Tina Green, investing a further GBP50m in the group.
And it is now understood that several American property companies have filed a legal challenge against Arcadia over its use of the CVA process. In the US the company plans to restructure its operations, with the potential closure of all 11 Topshop Topman stores in America.