BHS and the CVA

It has recently been reported that the department store chain BHS (British Home Stores) is in serious financial difficulties and that 40 of its 164 stores could potentially close, unless it can significantly reduce the rents being paid on a number of its trading sites.

It is said that BHS has been loss-making for the last seven years and is burdened with a massive pension deficit. To make matters worse for the firm, it is struggling with high rental costs and long leases (with BHS apparently believing it is paying well over market rates for around a quarter of its stores).

In a bid to try and turn things around, BHS is proposing a Company Voluntary Arrangement (or CVA). Put simply, a CVA is an agreement or ‘deal’ made between a company and its creditors whereby the creditors accept a certain proportion of their debt in settlement, typically repaid to them from future profits. A CVA can be an incredibly flexible rescue procedure and is managed by a licensed insolvency practitioner known as a ‘supervisor’. You can learn more about CVAs by visiting our website (link to Company Voluntary Arrangement landing page).

BHS’s financial state also raises wider concerns for certain high-street retailers, because the sector has become so competitive over recent years, particularly with the advent of supermarket clothing brands and large discount clothing stores.

If your business is affected by any of the issues raised in the above article, then a confidential discussion – at an early stage – with an experienced and qualified specialist to talk through the range of options available, may well be an appropriate course of action. Please contact us if you would like an initial consultation, free of charge.