Beleagured clothing-to-homewares retailer Bhs was thrown a lifeline yesterday as creditors in two key votes backed controversial plans to turn around the business.
The high street stalwart, owned by the Retail Acquisitions consortium for the past year, disclosed that more than 95 per cent of creditors to Bhs Limited, including landlords, voted in favour of its company voluntary arrangement (CVA).
The CVA aims to revive the ailing business by cutting its rents and preventing widespread store closures, and needed only a 75 per cent majority of the vote.
The company said the decision to back the plans for Bhs Ltd – which represents 125 stores – was a “significant milestone” in improving the financial viability of the business.
“The success of the CVA of Bhs Limited will enable the business to continue the group-wide updated turnaround plan and safeguard the future of BHS, protecting thousands of UK jobs,” it said.
In a second CVA vote on Bhs Properties, which oversees 23 Bhs stores, the company got the needed 75 per cent vote to pass the proposals.
Bhs had put forward the CVA proposals asking its property landlords to slash rents by 50 or 75 per cent on 47 struggling stores. The firm also told landlords that it needed rents to be reduced “substantially” on 40 more stores, or risk seeing them close within ten months.
But Bhs pledged it would pay the rent at the current rate on 77 of its better-performing stores by making monthly rather than quarterly payments for the next three years.
Chief executive Darren Topp said the decision by the creditors and landlords to back the CVAs had provided the “opportunity to move forward”.
Topp said: “It is a tough time for retailers across the UK with huge structural challenges faced by all. However, we have a very credible plan to return BHS to growth and profitability and a revitalised British Home Stores will emerge as we accelerate our turnaround plans.”
He added: “This is confirmation that BHS’s creditors believe that the right strategy is in place and we have the right team to deliver that strategy.”
Bhs was sold to Retail Acquisitions by retail billionaire Sir Philip Green for £1 in March 2015, as its losses widened to £21 million in its 2013-14 financial year from £19m the year before.
Amid difficult trading, the group announced at the beginning of this month that it would axe 150 staff from its head office and 220 from its shops to cut costs.
Meanwhile, the retailer still faces the challenge of protecting the finances of the thousands of savers in its pension scheme, which has a deficit of some £571m.
The creditor rights of the Bhs pension fund have now been passed to the Pension Protection Fund (PPF), which safeguards pension scheme members if their employer becomes insolvent.