BHS pushes for CVA as 40 stores come under closure threat

Department store BHSis threatening to close 40 stores – including two in the East Midlands – if it doesn’t receive a reduction in its rent.

BHS was sold last year for £1 to a group of investors called Retail Acquisition. Now, the company is trying to seal a deal for a Company Voluntary Arrangement (CVA) to try and turn the company around. To do this, it needs to secure the approval of 75 per cent of its landlords.

Will Wright, restructuring partner at KPMG and proposed ‘supervisor’ of the CVA, said: “For almost 90 years, BHS has been one of the most iconic brands on the UK high street, but in recent years has seen its profitability decline as it has sought to respond to changing customer behaviours, increased competition and the rise in omni-channel retailing.

“These CVA proposals are one facet of a wider turnaround plan, and specifically tackle one of the business’ largest fixed costs, the onerous lease arrangements across its UK-wide store portfolio.

“While the company’s store estate is located across favourable retail locations, a number of these leases are unsustainable, predicated on terms which were originally negotiated some decades ago. With the support of its lenders, shareholders and landlords, the company will be able to reshape its debt and operational structure to a model more suited to today’s multi-channel retail environment. The company needs to secure at least 75% creditor approval for these CVAs.”

Brian Green, restructuring partner at KPMG and second proposed supervisor of the CVAs, added: “BHS currently has a total of 164 retail sites across the UK. Importantly, none of these stores will close on day one, and suppliers will continue to be paid on time and in full.”

Some 77 of its “most viable” stores will continue to pay full rent, although it will move to a monthly, rather than quarterly, billing cycle for three years. These stores include Chesterfield, Leicester, Lincoln and Nottingham Listergate. A further 47 stores have been identified as being viable at a reduced equivalent monthly rent of either 75 per cent or 50 per cent.

BHS was founded in 1928.