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Lifeline for Philip Green's Arcadia after landlords back rescue plan

Sir Philip Green's restructuring plan has been supported by landlords
Sir Philip Green's restructuring plan has been supported by landlords

Sir Philip Green's Arcadia empire will live on after landlords gave their support at the 11th hour for a controversial restructuring that saves the retailer from imminent collapse.

Arcadia, which has 520 shops across the UK and retail brands including Topshop and Dorothy Perkins, said three quarters of creditors had supported all of the seven company voluntary arrangements (CVA) after Sir Philip sweetened the terms for landlords by reducing his rent cut demands.

Retail experts have raised concerns that the restructuring will be just “delaying the inevitable” unless Arcadia aggressively invests in arresting its steady sales decline as young shoppers abandon its brands in favour of online fast-fashion rivals.

Landlords voted in favour of the plan that will result in about 50 shop closures and rent cuts of between 25pc and 50pc on almost 200 other shops. Arcadia's management warned landlords at the meeting of further closures after revealing the business will need just 300 shops in the future as more shopping shifts online, according to sources.

It is understood Arcadia narrowly won approvals after wavering landlord Land Securities gave its support at the "11th hour, 59th minute" in a tense five-hour meeting near St Paul’s cathedral in London.

Property sources had said the crunch-vote was “on a knife-edge” amid fears that the failure of just one CVA failure could bring down the whole business, particularly after major landlord Intu, owner of the Trafford Centre in Manchester, said it would not support the restructuring plans.

An Intu spokesman said it still believed that the terms of Arcadia’s CVA were “unfair to our full rent-paying tenants and not in the interests of any of our other stakeholders, including Intu shareholders and the 130,000 people whose jobs rely on the success of our prime shopping centres”. 

Intu’s rare, public resistance has been seen as a sign that landlords are pushing back on CVAs, which are being frequently used by retailers to reduce their rent bills. Ed Cooke, boss of retail property group Revo, said the Arcadia CVAs were approved with better terms "largely as a result of the unusually high level of influence and impact of the property owners' vote”.

Moody's, the credit ratings agency, said that Arcadia's CVA was negative for listed retail property owners that "face continued weak operating performance, with declining footfall and retail sales, and downward pressure on rents”.

It is believed that Sir Philip was spending at least 10 hours a day in the past week calling to negotiate with property bosses ahead of the vote. Arcadia was advised on the restructuring by advisers at property firm GCW and Deloitte, who had started to make preparations for an administration if Arcadia lost the vote.

"After many months of engaging with all our key stakeholders, taking on board their feedback, and sharing our turnaround plans, the future of Arcadia, our thousands of colleagues, and our extensive supplier base is now on a much firmer footing," said Ian Grabiner, Arcadia chief executive.

Stephanie White, real estate expert at Stevens & Bolton, cautioned that Arcadia "would be wise to keep the champagne on ice until the period to mount a legal challenge has passed. The deal did not have unanimous support and there is still a risk that the landlords who did not back the deal could find grounds to challenge it.” 

Mike Ashley's Sports Direct, which launched a legal challenge against the Debenhams CVA this week, said it was " ridiculous that CVAs are now being used as a tool to repair fundamentally badly managed businesses".

It is understood that landlords only asked one question on Sir Philip Green’s future involvement with the business. Mr Grabiner said Sir Philip had not had much involvement with the company for the past 12 months but that they “can’t stop him ringing up giving his opinion”.

The former tycoon has spent most of the past year out of the country, in Arizona and on his yacht off Monaco, since allegations of inappropriate behaviour towards staff, which he denies, surfaced last year.

As part of a deal to win the backing of the pensions watchdogs, Sir Philip and his wife Tina have agreed to pump in more than £100m of their own assets to partially plug the group’s pension deficit and invest £50m of equity into revamping the business.

The Pensions Regulator said that it believed "the best support for most pension schemes is a trading employer and we feel the CVA proposals provide the right balance between security for the pension schemes and the chance of sustainability for the company".

Mr Grabiner said the planned rent reductions would help afford a turnaround to drive the growth of its fashion business online and through wholesale channels, to " inspire a renewed loyalty to our brands that will support the long-term growth of our business".