Survival plan sees bank take stake in troubled Blacks chain

Published on Tuesday 3 November 2009 20:00

BANK of Scotland, now part of Lloyds Banking Group, is set to take a 5 per cent stake in embattled retailer Blacks Leisure as part of a rescue deal that preserves more than 4,000 jobs.

The stake, which is subject to shareholder approval, is one strand of a major overhaul of the outdoor leisure chain, which suffered a 18.1 million loss in the first half of the year.

Blacks, which began life in Greenock in 1861 as a sail-making business, is seeking to "ensure the survival" of almost 300 shops and save 4,300 jobs through a company voluntary arrangement (CVA) with creditors. CVAs, which allow retailers to dispose of unprofitable stores, have been widely used as an alternative to administration. Companies approach creditors, typically shop landlords, with a deal to pay a percentage of the outstanding rent.

As part of the proposed CVA, Blacks has set aside 7.25m to compensate the landlords of 101 stores that have either closed already or are in the process of closing. It is also asking the landlords of its remaining 291 branches to allow monthly rent payments for the next 18 months.

To support the rescue deal, Bank of Scotland, the company's lender, has agreed new banking facilities of 42.5m.

Blacks' chief executive Neil Gillis said: "The severity of the current trading environment and the drag of the loss-making boardwear business has required a more radical set of measures to complete the turnaround of this business.

He added: "The restructuring plan… and the new banking facility supporting it provide a realistic opportunity to ensure the survival of the core outdoor business which has the potential to become a strong, successful retailer."

A spokesman for Lloyds Banking Group said the proposed stake purchase will be put to shareholders at a general meeting after talks over the CVA have concluded. He added: "Essentially it is part of our fees for supporting the CVA."

If approved by shareholders, Lloyds will have the option to buy the shares in future at an agreed discount under what is known as a "share capital in warrant" arrangement. If rejected, Blacks will pay the bank 2m fees in cash. The CVA will need the approval of 75 per cent of creditors when put to the vote on 23 November.

Blacks tripled its losses from 6.7m in the 26 weeks to 26 August, dragged down by its boardwear division, Sandcity, and underperforming Blacks and Millets outlets.

Sandcity, which managed the O'Neill boardwear chain, was forced into administration in September. In the same month, Blacks announced the closure of 89 unprofitable stores across the UK, plus the loss of 50 jobs at its headquarters in Northampton.