BHS thrown lifeline as creditors back turnaround plan

Ccreditors have backed BHS plans to turn around the business by slashing the rents on more than half of its UK stores.

The department store chain said creditors voted in favour of its company voluntary arrangement (CVA) for BHS Limited, which aims to revive the ailing business by cutting costs and preventing widespread store closures.

The company said the decision to back the CVA for BHS Limited - which represents 125 stores - will ensure the continuation of the group.

It said: “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.”

The fashion and homewares retailer said more than 95% of BHS creditors, including landlords, voted in favour of the CVA for BHS Limited, surpassing the 75% needed to secure the plan.

However, the company still has to wait to discover the outcome of a second CVA vote today on BHS Properties Limited, which oversees 23 BHS stores.

The CVA deal comes after it was feared the company could plunge into administration and put more than 10,000 jobs at risk if creditors failed to back its plans to shore up the business.

The firm had put forward CVA proposals which asked landlords to slash the rents by 50% or 75% on 47 stores.

It has also told landlords that it needed rents to be reduced ‘’substantially’’ on 40 more stores, or risk seeing them close within 10 months.

But the company said it will pay the rent at the current rate on 77 of its ‘’most viable’’ stores by making monthly rather than quarterly payments for the next three years.

BHS chief executive, Darren Topp, said the decision by the creditors and landlords to back the CVA has given the company the “opportunity to move forward” and press ahead with its strategy to overhaul the business.

He added: “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 said the backing of the BHS creditors was a vote of confidence which showed they believed the right team and strategy was in place to put the company on a sound financial footing.

Struggling companies try to agree a CVA with creditors in a step to revive their fortunes while paying off debts.

It comes after BHS announced at the beginning of March that it would axe 150 staff from its head office and 220 from its shops in a move to cut costs.

Meanwhile, the 88-year-old retailer still faces the challenge of protecting the finances of the thousands of savers in its pension scheme, which has a deficit of £571 million.

The creditor rights of the BHS pension fund have now been passed on to the Pension Protection Fund (PPF), an organisation that safeguards pension scheme members if their employer becomes insolvent.

The PPF said it expects the scheme to pass over to the organisation, where members will receive compensation for their lost pensions.

But it said that a failure to reach a compromise with BHS on the pension scheme may still result in the company being declared insolvent.

It has also been reported that the Pensions Regulator is pursuing the former owner of BHS Sir Philip Green for a contribution to the company’s pension deficit.

BHS was sold by the billionaire retail tycoon for £1 in March last year, as losses widened to £21 million in 2013-14, up from £19 million the year before.

It was bought by the consortium Retail Acquisitions Limited, which has been the driving force behind the plans to return BHS to profitability.