Homebase, the loss making DIY retailer hit by the housing market slowdown has added its name to the list of major multi-site retailers that needs to restructure its business using the controversial Company Voluntary Arrangement (CVA) procedure.
Homebase was bought for £1 in May this year by Hilco having previously been bought by Australian company Wesfarmers for £340m two years ago in what has been widely regarded as a disastrous take over. When Wesfarmers sold the chain it had 250 stores and 11,000 employees.
Homebase had already announced closed 17 stores and it is thought that the CVA may be used to close over 40 more.
Stephen Hobson, Business Recovery Partner commented:
“As with all retail CVAs the treatment of landlords will be key. The British Property Federation (BPF) has already cried foul on behalf of its members, saying that the CVA process is repeatedly being used to prejudice their position unfairly. It is, however, understood that Homebase and its advisers have been in touch with the BPF about the restructuring.
“From the retailer’s point of view the categorisation of landlords into a few groups, with each group being treated in the same formulaic way in the CVA is much more attractive in terms of simplicity and time demands than looking to negotiate terms with perhaps hundreds of separate landlords.
“The insolvency profession was looking forward to the outcome of an application to Court to review this question in the context of the House of Fraser CVA but the dispute was settled before it got to court on undisclosed terms. It will be interesting to see precisely how the Homebase CVA deals with the landlord issue, especially if BPF input has been taken into account.”