An American retail landlord has mounted a renewed legal challenge to efforts to restructure Sir Philip Green’s embattled fashion empire.
Vornado Realty Trust has taken aim at two of the seven company voluntary arrangements taken out by Arcadia, two weeks after having a similar suit rejected by a court in the United States. Steven Roth, 78, Vornado’s billionaire chairman and founder, is believed to be enraged by Arcadia’s CVA.
Arcadia, which owns the Miss Selfridge and Burton chains, has been battered by the high street downturn and the shift of younger shoppers to fast-fashion brands. The company has 560 shops and employs about 18,000 people in Britain and Ireland.
A CVA is a form of insolvency that allows a struggling business to cut costs. Last month Arcadia secured backing from its creditors to shut 23 stores, cut rents of 194 shops and reduce the amount it pays to address its pension fund deficit.
Shortly before launching the CVA, Arcadia put its American business into administration, closing all 11 stores in a move that contrasted starkly with the former international ambitions of Sir Philip, 67.
Ten years ago the tycoon opened the doors to the first US Topshop in New York, accompanied by Kate Moss, the model. The retailer went on to open a string of shops after signing a deal with Leonard Green, the investment group, in a deal that valued the brand at $2 billion. Topshop’s waning popularity led the US outfit to sell its 25 per cent stake back to Arcadia for only $1 this year.
Vornado, said to be the biggest commercial landlord in New York and the owner of Topshop’s Fifth Avenue store, previously joined a suit with four other American landlords accusing Arcadia of depriving them of their contractual rights, of inflating the amount owed to non-property creditors to boost their voting power ahead of landlords and demanding more information on the retailer’s corporate structure. However, a US court dismissed their claim.
Ian Grabiner, Arcadia’s chief executive, said that the fresh challenges to two of its seven CVAs by Vornado was “entirely without merit and we will vigorously defend them. Our group continues to trade as normal and we remain focused on delivering our turnaround plans.”
Vornado itself has come under fire recently for its ownership of Toys R US, the former toy chain. It was an equal partner with KKR and Bain, the private equity firms that loaded the retailer with more than $5 billion of debt, resulting in large interest payment demands that squeezed the company’s finances.
Vornado did not respond to request for comment.
The Arcadia challenge is part of a trend of legal cases against CVAs and a sign of the tension between landlords and retailers. Sports Direct is challenging Debenhams’ CVA as part of its battle with management. The outcome of a legal challenge against a CVA by Regis, the hair salon chain is awaited.
Arcadia has followed other high street retail groups, including Mothercare, Carpetright and New Look, to pursue CVAs as traditional shop chains struggle to balance dwindling shopper visits with rising property costs.
News of Vornado’s legal challenge comes as fresh research by Savills, the property agent, shows that the most common use for a CVA is rent reduction — 37 per cent — while 30 per cent of stores have used CVAs to switch to a monthly rent, rather than quarterly payments. About 5 per cent of stores affected by CVAs shut, while another 16 per cent end up in liquidation.