Focus offers landlords CVA deal

Focus DIY has launched a restructuring deal with its landlords to secure the future of the home improvement chain.

During the past eight months the retailer has been trying to persuade its landlords to accept less rent for its 38 closed stores, which cost the business £12m ($20m) a year.

However, the company has turned to an increasingly popular insolvency process – a company voluntary arrangement – to push the deal through.

Bill Grimsey, chief executive, said: “They [the landlords] didn’t accept the deals we put in front of them and they could have done. We’ve tried to be fair.”

Under the terms of the CVA, which was arranged by BDO Stoy Hayward, Focus plans to shed the leases on its closed stores and offer landlords a share of a £3.7m compensation fund in return, saving the group £8.6m.

The company, owned by Cerberus, the US private equity group, is also asking the landlords of its 180 open stores to accept monthly rather than quarterly rent payments until 2011.

If the CVA is successful, Focus’s lenders, HBOS and GMAC, will grant a two-year extension to the company’s £50m revolving credit facility, which is due to expire at the end of this year.

If the CVA fails, the company said it was likely to fall into administration.

However, Mr Grimsey said he was confident the proposal would achieve the 75 per cent majority required when creditors vote on August 24, following JJB Sports’ success this year.

In April, the sportswear retailer became the first listed company to avoid administration through a CVA, which won the support of more than 99 per cent of its creditors.

The homeware and DIY sector has suffered both from the stagnant housing market and from the slump in consumer spending.

Ben Grose, asset manager at British Land, one of Focus’s landlords, said: “By their very definition, CVAs are not particularly fair but there are ways and means of going about them.

“We are supportive of this CVA because it is backed by a proven management team with a proven track record.”