Monsoon confirms plans for CVA process
Written by Hannah McGrath
Monsoon Accessorize is set to launch plans for a Company Voluntary Arrangement (CVA), as it looks to renegotiate rents on more than 50 per cent of stores.
The company confirmed yesterday that it had asked landlords to approve rent cuts on 135 of its 258 stores, as part of a rescue plan to safeguard the firm’s financial future.
However, whilst Monsoon Accessorize chief executive Paul Allen said the company was battling tough trading conditions that have hit the retail industry hard in recent months, the company said it had no plans for job losses or store closures as part of the CVA.
Under the proposed plan, landlords would share in a profit-sharing scheme giving them rights to up to £10 million, on condition that the company trades profitably and above forecasts.
The offer comes after Sky News first reported that Monsoon Accessorize founder Peter Simon had rejected demands from landlords for a minority equity stake in the company.
Simon has offered to cut rent of the company’s head office in White City, West London, which he owns, in order to reduce overheads by half.
Shareholders led by Simon have already provided an emergency £12 million secured facility and put up a further £18 million interest-free credit facility, which is conditional upon the CVAs being approved by creditors and landlords.
In a statement, Allen said: "Trading for the group has been difficult for some time, as it has been for much of the retail industry – this is due to a combination of factors, including rising costs, increased competition, and subdued consumer spending.
"Although the group has no external debt, the current rate of sales decline and recent working capital pressures have had a material impact on the group liquidity position, particularly at the low point in the working capital cycle during the financial year."
The CVA process is aimed at bringing store operating costs in line with market rents, Allen added.
"Through implementing the CVA and the shareholder credit facility, the group will be able to invest in the business, the brands, and in growing profitable sales channels – both in-stores and online,” he said.
A vote on the CVA process, which is being overseen by Deloitte, is understood to be scheduled for 3 July.
Monsoon's move comes after Sir Philip Green won approval from landlords to launch a series of CVAs across his Arcadia retail empire, which will see the company close 48 of its stores which include High Street brands Topshop, Miss Selfridge, Dorothy Perkins and Burton.