Creditors Approve Poundstretcher CVA Proposal

The creditors of the discount retailer Poundstretcher have approved the proposed company voluntary arrangement (CVA) put forward by the business on 16 June 2020.

Will Wright, restructuring partner at KPMG and joint supervisor of the CVA, said: “The approval of the CVA provides a stable platform from which the company can continue to operate across a more focussed store portfolio.”

The vote saw more than 90% of all voting creditors - and importantly, an overwhelming majority of landlords - choosing to approve the CVA, surpassing the 75% total required in order to pass the resolution.

The proposal was put forward in mid-June, with KPMG stating:

The CVA forms part of a wider turnaround plan which seeks to restructure Poundstretcher’s UK store portfolio, stemming losses from underperforming outlets, realigning head office costs and paving the way for investment in the business’ core estate and product offering.

Will Wright and David Costley-Wood from KPMG’s Restructuring practice are the proposed nominees of the CVA.

Will Wright commented: “One of the UK’s best-known discount retailers, Poundstretcher has suffered from significant impacts to profitability on several fronts over a sustained period, which were then further exacerbated by the impact of Covid-19 on footfall.

“Earlier this Spring, the Group engaged KPMG to undertake a marketing process to explore all strategic options for business. Regrettably, this process did not produce any solvent offers. Thus the CVA seeks to safeguard the long-term future of the business, across a smaller, more sustainable store estate.”

Summary:

• The company operates as a discount retailer from 450 stores across the UK and a distribution centre in Leicester.
• The company directly employs in excess of 5,500 people in its store network, warehouse and head office.
• The CVA proposal divides the store portfolio into three categories as follows:

o   For a total of 91 stores, the leases will be retained at current rents;

o   86 stores will see rents reduced by 30 and 40%, for a period of three years;

o   250 stores will see rents paid in full for an initial period of six weeks after which continued trading will depend on the commercial merits of each store with the relevant landlords’ collaboration.

The Company also occupies a further 23 stores under leases where the tenant is a connected company, Poundstretcher Properties Limited. It is the directors’ intention to place this company into administration prior to the decision date of the CVA.

Poundstretcher needs to secure at least 75% creditor approval by value for the CVA for it to proceed. Detailed proposal documents will be made available to creditors via a dedicated website today.  The creditors will vote on the CVA on 30 June 2020. Consultations have already taken place with key creditors and KPMG will spend the coming weeks in further talks with key creditors to ensure they understand the full detail of the proposal.

Source : KPMG

Image : James W Copeland / shutterstock.com

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