Pinnock told Drapers, a fashion industry news site, “It’s part of the restructuring of the business and a result of the previous management’s decisions. It’s the right process to move forward with and will protect the core part of the business, which is healthy.”
Accounts from Companies House show the company suffered losses of £1.3 million for the year ending February 2014.
A creditors meeting will be held on 22nd May where there will be a vote. 75% of creditors (by value) must vote in favour for the CVA to be approved.
If accepted, the arrangement will allow a proportion of debt to be repaid over a number of years while directors keep control of the company. Rent leases will be reviewed and the business will be restructured in order to continue trading.
A CVA can be an effective rescue method for businesses struggling financially. Often, the process has a far better outcome and will benefits creditors in the long run, compared to administration or liquidation.
Update: 26th May – The CVA has been approved by more than 80% of suppliers and landlords. This means there will be a reduction in rent across several stores, including Brighton, Tunbridge Wells, Reading, St Albans and Kingston ensuring the business has the support it needs to continue trading and be viable. There will be also be a few store closures with minimal redundancies.
It has been reported the option of administration or liquidation would have resulted in creditors only getting 6p in the pound. Now the company is going into a CVA, creditors will see a higher return.