The British Property Federation (BPF) have in the past been critical of CVAs as they believe that they unfairly penalise landlords. However they appear to have warmed to the process a bit.
Speaking at the Insolvency Today Annual Conference (ITAC) 2012, the BPF’s director of real estate policy, Ian Fletcher, said; “Our members tend to like the transparency of the CVA and I take on board the point that they don’t always work.
“With JJB, there has been some criticism but landlords received rents on units that they may not have done for another two years. We have to remember the situation that the business was in at the time.”
This is a bit of a turnaround in the BPFs view but they appear to be looking at the broader picture. What would have been the alternative? KPMG the main proposers of CVAs said at the conference that the mechanism had to be shown to be a better outcome than an administration. An administration would no doubt have a bigger impact on the ability of the company to pay rents and keep trading in existing premises.
It was also mentioned that the continuing weakness of consumer spending meant that companies that were already struggling and in CVAs were facing an uphill task and so the failure of a company in a CVA was a reflection more on the company and its market than the CVA process itself.
Of course we always say that the CVA needs to be well structured to ensure that it is fit for purpose. Common mistakes directors and their advisors make when proposing CVAs and implementing them are the following;
Not changing the management's way of doing things
Not cutting costs hard or fast enough.
Not getting all stakeholders on side. Such as the bank and crucial suppliers.
Trying to pay back too much too quickly.
Having over optimistic forecasts of future revenue.