CVA - a way to play fair?
According to David Wighton, Times Business Editor, the company voluntary arrangement for Stylo, Barratts shoes and Priceless chains is a promising development. His article is short critique of the CVA tool and how it can be used to exit leases, vary leases and contracts proving our long held view that CVA is preferable to Administration pre-pack.
Here is an extract
"In the Stylo case, the shoe retailer's subsidiaries have been placed in administration with the aim of rescuing them as going concerns. The administrators will propose company voluntary arrangements to the creditors that will include reduced rents. The rights of employees and the companies' liabilities under the group pension scheme will not be affected.
The process appears to offer more equitable treatment and greater transparency for all parties, and the top creditors, including landlords and lenders, are supportive.
If successful, the idea could be adopted by other distressed companies seeking to preserve value"
The Stylo CVA is designed to force the the landlords of the 400 off shops to change their old fashioned leases to a 3% of turnover base. This flexible rental will allow the company to survive in tough times and give the landlords a fair share of the upturn when it eventually arrives.
So will Britain finally "get" the CVA, we truly hope so, it saves many companies, bank loans, creditors monies and jobs. Surely that's better than dumping the debt, employees and pensions?
If your retail business is talking to insolvency practitioners make sure that the CVA option is considered carefully, don't simply accept the IP's favourite tool - pre-pack administration!