Monsoon CVA seeks rent cuts on 135 stores, owner to lend it £30m
today Jun 20, 2019
Monsoon Accessorize has released details of its company voluntary arrangement (CVA) plan and it's asking its landlords to approve rent cuts on as many as 135 of the 258 stores that it currently leases. The move comes after the company said that it has seen a period of "difficult" trading.
So what's in it for the landlords? Apart from having their properties being continuously occupied with the company having no plans to shut any locations, the retailer is offering them up to £10 million in a profit-sharing scheme if it returns to the black in the future.
As well as no closures in the offing, the company isn't preparing to cut any of its roughly 4,440 jobs either.
The proposals will be voted on at a creditors meeting on July 3.
The business, which is still controlled by its founder Peter Simon, has also received an emergency £12 million secured loan from him with the promise of a further £18 million that would be lent to it on an unsecured basis at 0% interest if the CVA gets voted through. Simon is also the landlord of the firm’s London head office and he has agreed to cut the rent there by 50%.
While some commentators and landlords have questioned whether Monsoon’s situation is dire enough to require a CVA, CEO Peter Allen said the company had seen falling sales for the past two years. And even though it has no external debt, the combination of sales that are still declining “and recent working capital pressures have had a material impact on the group liquidity position,” he explained.
He blamed the tough trading conditions on rising costs, increased competition and subdued consumer spending.
It's clearly a disappointment for the company that had launched a recovery plan in early 2016 and that Allen said “initially delivered positive like-for-like store sales.”
But with market conditions declining since then, Monsoon isn't the only big name to have run into trouble and like some of its struggling peers, it’s in urgent need of some breathing space.
Allen said: “The proposed CVA is designed to reduce store-operating costs and to bring the costs more in line with market rents.” This should allow the group to “invest in the business and the brands, and in growing profitable sales channels – both in stores and online.”
The company also said it has already taken big steps in improving its two brands' web and marketplace offer, and has seen growth in these areas.
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