News this week that fashion retailer New Look has defeated the legal challenge to its CVA poses interesting questions for the UK restructuring and insolvency landscape. As the retail and the wider economy begin to open up – and critically as Government support packages fall away – retailers will be turning their attention from surviving the pandemic to surviving outright. The combination of a significant build up of rental arrears and a shift in consumer spending from bricks to clicks creates a number of challenges for the UK high street.
There has been much speculation that the advent of the Restructuring Plan was likely to sound the death knell for the CVA – the Plan’s ability to cram down dissenting creditors and provide certainty of outcome through the court led process makes it an attractive tool. However the requirement to provide significant levels of evidence amongst other things makes the Plan an expensive tool for already struggling retailers.
The ramifications from both the New Look judgement and the Virgin Active Restructuring Plan being sanctioned are likely to reverberate around retail and other similarly distressed sectors for some time. And, once again, it looks like the lion’s share of the discomfort may well end up with the landlords. This is unlikely to do much for the CVA’s already battered reputation among property owners.
Earlier this year we discussed CVAs with the British Retail Consortium. We shared our thoughts on how, when used correctly and consultatively with all stakeholders, they were a useful means to underpin transformation. Without careful stakeholder management though, they can become a blunt tool which leaves the landlords feeling unduly battered. This remains just as applicable in a Restructuring Plan context.
As the moratorium in place to protect tenants from action being taken in respect of unpaid rent is due to expire at the end of June and solutions by both landlords and tenants are being looked at to avoid a cliff edge this space will continue to be dynamic and fast moving.