Will Wright, restructuring partner at KPMG comments on the company voluntary arrangement (CVA) proposed today by Paperchase Products Limited.
Commenting on the company voluntary arrangement (CVA) proposed today by Paperchase Products Limited, Will Wright, restructuring partner at KPMG and proposed 'supervisor' of the CVA, said:
“Over the last fifty years, Paperchase has grown to become one of the UK’s most well-known and innovative design-led stationery retailers. However, like many other businesses in the retail sector, the company has been adversely affected by a cocktail of well-documented issues, including a reduction in footfall, increased rents and business rates, and margin pressure from sterling depreciation.
“Today’s announcement follows a detailed strategic review of the business undertaken by the company’s directors, during which a series of consultations with key stakeholders took place at which soundings were taken on whether they would be supportive in principle of the company proposing a CVA.
“We believe that what has been put forward today reflects the feedback received during this process, and specifically, gives the company the ability to rationalise its store portfolio by exiting stores that are unprofitable, secure rent reductions where stores are over-rented and implement turnover rents to reflect the highly seasonal nature of the business.
“As part of the review, the directors have also been successful in negotiating a financial restructuring with the company’s lenders, which will enable new investment to come into the business. Such additional investment and the completion of the wider restructuring is however conditional on the approval of the CVA proposal and successfully concluding the subsequent challenge period.”
Paperchase operates 145 stores across the UK. The CVA proposal divides the company’s sites into six categories.
45 Category 1 sites will largely remain unchanged, whilst turnover rents are being proposed at 70 sites within Category 2, 3 and 4, with a varying guaranteed minimum base rents, ranging from 35% to 80%. A total of 28 Category 5 and 6 sites will experience a 50% rent reduction for three months, following which there will be either a rent-free period or a closure and exit.
The proposed supervisors of the CVA are Will Wright and David Costley-Wood from KPMG’s Restructuring practice.
Paperchase needs to secure at least 75% creditor approval for the CVA for it to proceed. A detailed proposal document will be made available to creditors via a dedicated website today. The creditors will vote on the CVA on 22nd March 2019. KPMG will spend the coming weeks in talks with creditors to ensure they understand the full detail of the proposal and have had the opportunity to submit their vote.
Note to Editors:
Of the 145 stores Paperchase operates in the UK, 3 stores are not included in the proposal. These stores are located in Jersey, Guernsey and Covent Garden.
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About company voluntary arrangements (CVAs)
Where a company is experiencing difficulties in paying its debts, the directors can propose a company voluntary arrangement (CVA) whereby the company enters into a legally binding agreement with its creditors, such as their suppliers or landlords. In a similar vein to an individual voluntary arrangement (IVA), which gives an individual an alternative to bankruptcy, a CVA enables a company and its creditors to come to a compromise agreement and avoid an administration or liquidation. A CVA can provide a company with some breathing space to allow it to reorganise or restructure its funding and/or its operations with as little disruption to the day to day trading as possible, with the control of the company usually staying within the existing management.
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