BHS has issued a warning to its creditors stating they stand to lose up to £1.3bn (€1.674bn) without the implementation of a radical turnaround plan.
The company has filed a Company Voluntary Arrangement (CVA) revealing that the black hole in its pension fund currently stands at £571m (€735m) on a buyout basis, a £120m (€154.6m) increase over the last valuation in 2012. Landlords are owed almost £517m (€666m).
The CVA requires the approval of at least three-quarters of the creditors in a meeting scheduled to take place on 23 March. The document proposes three possible scenarios. In one scenario, if enough creditors accept the proposal, some landlords may recover all of their dues, while the other two scenarios are less optimistic, proposing a recovery of a mere 0.05p in the pound.
The proposal divides BHS’s 164 stores into categories based on the commercial and strategic viability of the individual locations. The primary category includes 77 stores that are to be maintained at their current rents, while the remaining stores will be retained only if a reduction in rent is granted by landlords.
The document reveals that the company has been loss-making for seven consecutive years, struggling in the face of competitive discount retailers such as Primark and supermarkets introducing clothing to their offer.
BHS Limited’s sole shareholder, BHS Group Limited, was acquired from Taveta Investments (No. 2) Limited, the owner of the Arcadia Group, by Retail Acquisitions Limited in March 2016. In connection with the acquisition, Arcadia Group wrote off £215m (€277m) of inter-company debt.
