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Monday, 24 August 2009

Focus DIY - The Times writes good article on CVA proposals

Focus DIY CVA creditors meeting is held today (24th August). In the the Times page 39, Marcus Leroux and Rebecca O'Connor have written a good article about the CVA, the background with regards to landlords and creditors and the voting procedure.

This CVA (click for guide) is proposing that the company exits 38 stores, that are closed. The other 180 landlords will be paid full rent but will have to accept monthly payments in arrears. Given that landlords represent 90% of the voting creditors, it is likely that the 38 landlords who are seeing their leases determined, will not be able to vote down the 180 others whose store leases continue, albeit with variations.

The Focus CVA will see leases for empty stores terminated with two payments equivalent to six months’ rent. The DIY chain has 180 stores still trading with the 38 closed outlets costing £12 million a year in rent. While the payout is less than the lease values, it’s more than they would get if the firm went under.

The retailer has also agreed to pay empty NNDR rates on the closed stores, which would provide substantial cash savings for the landlords while they find alternative tenants.

The firm’s secured lenders, HBOS and GMAC, will grant a two year extension to the company’s £50 million revolving credit facility, which is due to expire in December.

This will be another step forward in the pragmatic use of CVA's to restructure debt and leases. The most important feedback that I have seen is that the advisors and the company have both driven this CVA by talking to key creditors about their proposals and gaining a consensual majority approach. Common-sense applies in other words.

This is a key part of our approach to ALL CVA's that we advise on. Talk to the key stakeholders, creditors and build on our initial strategy around those conversations

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