• New Look and Store Twenty One are among a number of UK retailers to have entered into an insolvency process known as a company voluntary arrangement (CVA) this year.
  • House of Fraser and Mothercare are among others seeking CVAs.
  • Retail property owners, however, say the process is being abused.
Questions are being raised around high street retailers’ motives for undertaking CVAs

Questions are being raised around high street retailers’ motives for undertaking CVAs

UK fashion chains including House of Fraser and Mothercare are coming under fire from high street landlords who accuse the retailers of pushing them into accepting lower rents via increasingly controversial CVAs.

New Look and Store Twenty One are among a number of UK retailers to have entered into an insolvency process known as a company voluntary arrangement (CVA) this year. House of Fraser and Mothercare are among others seeking CVAs, which allow struggling businesses to walk away from certain liabilities and negotiate lower rents to help avoid financial collapse.

However, questions are now being raised around retailers' motives for undertaking CVAs and the increasing number being sought.

Revo, which represents retail property owners, wrote to the Commons Housing, Communities and Local Government Committee this weekend drawing attention to the role of accountants who it says are "aggressively" marketing CVAs "in a way that runs contrary to the legislation's intention and the wider interests of society."

"It is beyond doubt the process is being abused, with CVAs now being used solely to reduce rental liabilities and terminate lease agreements entered into by owners in good faith," Revo wrote.

It argues that the financial assumptions made by some advisers and consultants to justify CVA proposals must be "scrutinised and challenged."

House of Fraser's CVA plans, in particular, have courted controversy. The department store chain, owned by the Chinese group Sanpower, intends to sell a 51% stake to a related company, C.Banner, if the CVA goes through, with the expected closure of up to half of its stores.

Property giants including Legal & General and Westfield are understood to have hired restructuring firm Begbies Traynor, and property agency JLL, to engage with House of Fraser and demand detailed forecasts for the retailer's post-CVA performance.

A spokesperson for House of Fraser told just-style: "It makes sense for landlords to take advice. We would expect them to and we anticipate a good dialogue with them going forward."

Revo, meanwhile, is calling upon the Committee to "thoroughly investigate" the recent use of CVAs and to call nominees before the Select Committee to ascertain how CVAs, as currently marketed, fit within the 'spirit' of the original legislation, and evidence of the long term success of the CVA process, through a review of previous cases.