Full story: How Arcadia avoided administration disaster
If you???re just tuning in, here???s our news story on today???s dramatic vote on Arcadia???s future:
Philip Green???s Arcadia avoids administration as rescue deal backed
Sir Philip Green???s Topshop to Burton retail empire has staved off collapse after winning the backing of creditors for a rescue plan that involves the closure of 50 stores and 1,000 job losses.
Landlords of Arcadia Group???s 570 UK standalone stores, which are also home to Dorothy Perkins, Topman, Wallis, Evans, Outfit and Miss Selfridge, approved the plan on Wednesday, averting a slump into administration that would have put a further 17,000 jobs at risk.
Ian Grabiner, chief executive of Arcadia Group, said:
???After many months of engaging with all our key stakeholders, taking on board their feedback, and sharing our turnaround plans, the future of Arcadia, our thousands of colleagues, and our extensive supplier base is now on a much firmer footing.
???I am confident about the future of Arcadia and our ability to provide our customers with the very best multi-channel experience, deliver the fashion trends that they demand and ultimately inspire a renewed loyalty to our brands that will support the long-term growth of our business.
The complex deal required 75% of all creditors and at least half of landlords to vote in favour of seven company voluntary arrangements (CVAs), which are insolvency procedures that have been used by a string of high street names to shut stores, including New Look and Mothercare.
Green sought to win over landlords with an initial promise to give them a 20% stake in the business and invest an extra ??50m in the stores as part of a ??135m turnaround plan intended to help Arcadia compete with rivals such as Asos, Zara and H&M.
Green: We've scored a 95th-minute winner
Sky News???s Adam Parsons has caught up with Sir Philip Green.
The retail chief has welcomed today???s support from creditors, and even claimed Arcadia has scored a ???95th-minute??? winner in its battle for survival.
Simply getting its CVA approved today doesn???t guarantee Arcadia???s long-term survival.
Nelson Blackley of Nottingham Business School, said points out that other retailers have tried restructuring themselves, but still failed.
Given the crisis on the high street, Sir Philip Green needs to innovate, and possibly shut more stores too.
???What today???s decision hasn???t changed is the level of competition in the fashion retail sector, where online disruptors, such as ASOS and Bohoo.com as well as fast fashion retailers with physical stores such as Zara, H&M and Primark, all of whom have all taken share from Arcadia.
As recent history has demonstrated, a CVA is certainly not a guarantee of retail survival. British Home Stores, Austin Reed and Toys R Us, amongst others, all went down the CVA route but eventually failed. ???
My colleague Sarah Butler???s also heard that Land Securities, one of the UK???s biggest commercial property firms, backed Arcadia???s CVA.
The FT???s Jonathan Eley says Arcadia???s landlords have resented paying the bill for the company???s poor performance.
Many property companies bitterly resented the terms of the CVA [Company Voluntary Arrangement], saying that it was opportunistic and forced creditors to foot the bill for years of under-investment in the core operations.
Arcadia has said it will invest ??135m over three years in refurbishing stores, improving its website and building more distribution capability. But this represents a lower rate of capital spending than seen in previous years and is being financed by improved profit and cash flow, not new investment into the business.
Landlords who voted in favour of the plan will share around ??40m from a compensation fund, and if Arcadia is sold in the future they will also take 20 per cent of any equity value ascribed to it.
17,000 jobs saved, but 1,000 face axe
We have confirmation that around 1,000 jobs will be lost at Arcadia, through the store closures outlined in the restructuring deal.
Stephanie White, Associate and real estate expert at Stevens & Bolton LLP, points out that Arcadia could face a legal challenge from unhappy creditors.
Here???s her take on today???s agreement:
???Landlords struck a compromise to avoid the group passing into the hands of the Administrators, which could be catastrophic for the high street.
???Landlords pushed the Arcadia group to come up with a better deal and they were right to do that because Arcadia has come up with a proposal that landlords felt able to give their backing.
???However, Arcadia would be wise to keep the champagne on ice until the period to mount a legal challenge has passed. The deal did not have unanimous support and there is still a risk that the landlords who did not back the deal could find grounds to challenge it.???
Frank Field demand pension promises
Frank Field, a long-time critic of Philip Green, is calling on the retail chief to give ???binding promises??? that Arcadia???s pensions will be fully guaranteed.
Parliament???s Work and Pensions Committee (which Field chairs) has written to the Pensions Regulator seeking ???further clarity and assurances??? over the cash and assets that will be available to plug Arcadia???s massive pension scheme deficit.
???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.
Last week the Greens agreed to put ??25m more into the pensions pot, having been asked to cough up ??50m to fix its black hole.
Intu, one of Arcadia???s biggest landlords, has heavily criticised today???s decision after being outvoted by other creditors.
Intu says the CVA gives Arcadia an unfair advantage against other retailers, through a lower rent bill.
Rating agency Moody???s say today???s rescue deal undermines the financial health of UK property firms.
Ramzi Kattan, a vice president at Moody???s explains:
???Arcadia???s landlords have approved company voluntary arrangements that will close stores and slash rents.
This is credit negative for retail property owners, who face continued weak operating performance, with declining footfall and retail sales, and downward pressure on rents.???
That explains why landlords rejected the original CVA a week ago, forcing Philip Green to sweeten the deal (with smaller rent cuts).
Ultimately, landlords couldn???t face the prospect of shutting hundreds of Arcadia stores across the UK, says Joanne Fearnley, partner and a commercial property expert at law firm Gordons.
???Ultimately, the risk to the further demise of the High Street and the loss of big names - Topshop, Burton, Miss Selfridge and Dorothy Perkins - was too much of a bitter pill for landlords to swallow and they have settled for large rent reductions instead.
This means 23 stores will close and the rest of Arcadia???s 500 plus stores will keep trading. The threat of administration has been lifted and jobs saved???for now.
But....she also warns that Arcadia???s long-term future is still unclear:
???As we are seeing with other retailers who have followed the same route, time will tell whether or not this is a temporary saving or whether the dent to the confidence of landlords will result in them putting in place contingency plans on the prime locations in particular, so that the demise of Arcadia becomes inevitable over time.???
Reaction is flooding in:
Here???s the BBC???s Danni Hewson:
And here???s James Child of Estates Gazette:
What happens now?
By approving Arcadia???a CVA, its landlords have saved the company from collapsing into administration.
That means that your local Top Shop, Miss Selfridge, Dorothy Perkins and Burton store will be open as usual tomorrow. Arcadia???s 18,000 staff will still have a job too.
But... as part of the deal, some 23 stores will shut, costing hundreds of jobs. Another 25 or so are earmarked to close in future too.
Sky News???s Mark Kleinman points out that Arcadia faces further hurdles:
This rescue deal will put Arcadia on a firmer financial footing, says its clearly relieved CEO, Ian Grabiner.
???We are extremely grateful to our creditors for supporting these proposals and to Lady Green for her continued support. After many months of engaging with all our key stakeholders, taking on board their feedback, and sharing our turnaround plans, the future of Arcadia, our thousands of colleagues, and our extensive supplier base is now on a much firmer footing.
???From today, with the right structure in place to reduce our cost base and create a stable financial platform for the Group, we can execute our business turnaround plan to drive growth through our digital and wholesale channels, while ensuring our store portfolio remains at the heart of our customer offer.
???I am confident about the future of Arcadia and our ability to provide our customers with the very best multi-channel experience, deliver the fashion trends that they demand, and ultimately inspire a renewed loyalty to our brands that will support the long-term growth of our business.
???Finally, I would like to thank all of our team and advisors for their support throughout the CVA process. It has been incredibly challenging for all concerned but I believe this is the right outcome for all our creditors.???