Focus DIY agrees rescue deal

Focus DIY has agreed a rescue deal with landlords that will save the home improvement chain from administration.

An overwhelming majority of the company’s creditors voted in favour of a proposed Company Voluntary Arrangement - an increasingly popular insolvency process - at a meeting on Monday afternoon.

Under the terms of the CVA, which was arranged by BDO Stoy Hayward, Focus will be able to save £8.6m ($14m) by shedding the leases on its 38 closed stores. In return, the company has offered landlords a share of a £3.7m compensation fund.

The landlords of its 180 open stores have also accepted monthly rather than quarterly rent payments until 2011.

Although the deal only needed the approval of 75 per cent of creditors, the main proposal won over 99 per cent of the vote, securing almost 5,000 jobs.

For stores under the group’s Payless brand, creditors - mainly landlords of closed stores - voted 93 per cent in favour.

The success of the CVA is crucial to the retailer’s plans for a wider debt restructuring. HBOS and GMAC, Focus’s lenders, had agreed that if the CVA was approved it would grant the company a two-year extension to its £50m revolving credit facility, which was due to expire at the end of the year.

Bill Grimsey, chief executive, said: “We are very pleased with the outcome of today’s meetings. Throughout this process we have engaged on a transparent basis with all our suppliers and landlords and we look forward to continue working with them over the years ahead.

“Trading is currently ahead of management expectations and with this CVA now firmly behind us we can concentrate on managing our existing open stores.”

The DIY retailer, which was bought in 2007 by Cerberus, the US private equity group, has been struggling with a heavy debt burden and lower consumer spending.