Sir Philip Green last night struck an eleventh-hour deal to save his retail empire after Arcadia won over creditors to its plan to cut stores and slash rents after a tense stand-off with landlords.
The fate of an emergency restructuring of Arcadia, which will lead to hundreds of job losses, had been on a knife-edge. The Topshop owner abandoned a vote on its proposals last week as it appeared that landlords would block the plan. It reconvened the creditors meeting yesterday after an offer by Sir Philip’s family on Friday to soften the rent cuts, after last-ditch talks with landlords.
The result remained uncertain after it emerged on the eve of the vote that Intu Properties was against Arcadia’s plans. However, Arcadia disclosed yesterday that it had secured enough support despite Intu’s opposition, warding off an administration of the business that would have threatened all 18,000 staff and the livelihoods of its suppliers.
A collapse would have dealt a severe blow to Sir Philip, once dubbed the “king of the high street”, whose reputation as a retailer has suffered from the collapse of BHS in 2016, 13 months after he had sold the department stores chain to a group of industry novices.
The restructuring is designed to give breathing space to Arcadia, which owns brands including Burton, Dorothy Perkins and Miss Selfridge. It traces its roots to 1903 and to a men’s clothing business founded by Montague Burton, an 18-year-old Lithuanian immigrant, in Chesterfield.
Arcadia needed its creditors, which include suppliers, to approve seven company voluntary arrangements, a type of insolvency procedure. Each CVA required the support of 75 per cent of creditors to pass and Arcadia had warned that if they were not approved it was “highly likely” to fall into administration. Intu had accounted for about 15 per cent of the vote across at least six of the arrangements.
The CVAs pave the way for the closure of 23 of Arcadia’s 566 shops in the UK and Ireland — putting at risk 520 jobs — rent reductions at 194 sites and the axing of all 11 Topshops in America. A further 25 British shops are earmarked for closure through a separate process, which could hit 500 jobs.
Ian Grabiner, 60, Arcadia’s chief executive, said that the process had been “incredibly challenging for all concerned . . . We are extremely grateful to our creditors for supporting these proposals.”
Oliver Buhus, operations director of Paragon Clothing, a supplier to Arcadia, said that “the landlords would have had a lot to answer for” if the CVAs had been blocked.
Intu said it was “disappointed” but would work with Arcadia “to achieve the best outcome for both sides”. A spokesman said that the terms of the restructuring were “unfair to our full rent-paying tenants and not in the interests of any of our other stakeholders”.
Sir Philip, 67, originally asked landlords to agree to rent reductions of between 30 per cent and 70 per cent. Last Friday he offered to lower the reductions to between 25 per cent and 50 per cent after the first creditor meeting was adjourned.
These changes will be funded by his wife, Lady Green, the ultimate owner of Arcadia, and will cost about £9.5 million in the first year.
A spokesman for PJT Partners, an investment bank representing landlords, said: “We engaged with Arcadia early in the CVA process, with the aim of agreeing terms on a consensual restructuring, an approach which altered many of the terms to produce a fairer outcome for all landlords and stakeholders.”
“The focus from management must now be on Arcadia’s store and multi-channel investment strategy and ensuring the business is in the best possible position for the future.”
Sir Philip’s family had been in a battle with the Pensions Regulator over a funding package for Arcadia’s pension schemes, which are in deficit. His family agreed to increase its proposals by £25 million, taking the overall three-year package to £385 million.
Frank Field, who chairs the Commons work and pensions committee, said: “Now that, thankfully, Arcadia’s life has been extended, the committee will try to ensure that the Pensions Regulator gets an effective programme in place to ensure that Arcadia staff receive in full the pensions that Sir Philip and Lady Green have promised them.”