JJB cap in hand again as 45 more stores shut

Struggling sportswear retailer JJB Sports yesterday unveiled plans to close 45 stores as it proposed a second company voluntary arrangement (CVA) to creditors in two years to keep the business afloat.

The company placed a further 50 stores on a watch list - with their fate now in the balance. JJB said its remaining 150 were core to the business and therefore safe from closure.

The group - in which Microsoft founder Bill Gates holds a 5.5 per cent stake - employs about 6,300 staff.

Approval from shareholders and creditors for its new CVA would let it continue trading while striking a deal with landlords to close stores and pay only part of the rent, the company said.

To become effective, JJB's proposals need the backing of 75 per cent of unsecured creditors and 50 per cent of shareholders, who will vote on the CVA at an extraordinary general meeting (EGM) on Friday next week.

JJB did not reveal the identities of the stores earmarked for closure but a full list is expected before the EGM.

Chairman Mike McTighe said: "We are confident that, with the support of our key stakeholders, we can complete this restructuring in the coming weeks."

Last week, JJB revealed it had been approached by thriving rival JD Sports Fashion about a possible takeover and confirmed plans for emergency fundraising of 31.5 million. The talks with JD were described as "highly preliminary".

Analysts are sceptical a deal will emerge given that JD may prefer to wait and see whether JJB survives. Earlier this week, analysts at Peel Hunt said: "At face value, the approach from JD Sports looks like a mismatch, in the sense that any sensible valuation for JJB is unlikely to meet investor approval given the level of funds invested to date."

JJB yesterday warned again that it required a larger capital raising, in addition to the 31.5m, in order to survive. It said it would "no longer be able to trade as a going concern, which would result in the appointment of receivers, liquidators or administrators," without this additional cash.

Having initially risen on news of the second CVA, shares in JJB - which have shed more than half their value over the past three months - closed yesterday down 2.9 per cent or 0.13p at 4.38p, valuing the business at about 29m.

JJB was driven to the brink of collapse during the recession, but survived thanks to a deal to sell its fitness clubs to founder Dave Whelan, a CVA that saw it close 140 stores, new banking facilities and an equity fundraising.

JJB is not the only retailer to be closing shops. Fellow high street chain HMV unveiled plans at the start of this year to close 60 stores - about 10 per cent of its total - over the next 12 months and seek a further 10m a year of cost cuts.Rivals Zavvi and Woolworths collapsed during the recession.

CVAs have been used by a number of retailers in recent years - including Blacks Leisure - to manage their debts by coming to new repayment agreements with their creditors.

On Tuesday, creditors of Dundee football club voted to accept a CVA that meant they would be paid only 6p for every 1 owed to them. HM Revenue & Customs voted against the measure, which will see it recover only a tiny portion of the 460,000 owed.