Focus set to nail rescue deal with landlords

Focus DIY, the home improvement chain, is poised to secure its future on Monday through a rescue deal with landlords.

Its creditors are expected to vote in favour of a proposed Company Voluntary Arrangement – an insolvency process that will save it from administration.

Bill Grimsey, chief executive, told the Financial Times: “The indicators that I have received so far from all of the creditors – the landlords, the suppliers, and my colleagues because they’re creditors – is that there is overwhelming support for what we are doing.”

He said he had spoken to all the main landlords, which make up the largest group of creditors and include British Land, Aviva, Land Securities and Hammerson, and they had indicated their support for the deal.

“It [the CVA] means that we can concentrate on the recovery of the Focus business during what is one of the toughest recessions,” Mr Grimsey said. “I guess that people may have considered Focus as a candidate for not surviving 2009 and what this means is that we will, and we will compete in this market.”

The DIY retailer had been struggling under a heavy debt burden when it was bought by Cerberus, the US private equity group, in 2007.

But one year into the turnround plan led by Mr Grimsey, the housing market crash and the consequent recession hit demand in the DIY sector, leaving the Cheshire-based company on the brink of administration.

Focus launched this month the CVA – an increasingly popular insolvency process – in a bid to save the company and protect almost 5,000 jobs.

Under the terms, which were arranged by BDO Stoy Hayward, Focus plans to shed the leases on its 38 closed stores and offer landlords a share of a £3.7m ($6.1m) compensation fund in return, saving the group £8.6m.

The landlords of its 180 open stores are also expected to accept monthly rather than quarterly rent payments until 2011.

Duncan Grubb, head of credit control at Hammerson, said: “We supported the JJB CVA earlier this year as it was assembled in a way that was fair to both parties.

“The Focus DIY CVA follows a comparable structure and a successful take-up allows the company to continue trading, helping to assure its future.”

After the deal is approved by more than 75 per cent of its creditors on Monday afternoon, Focus’s lenders – HBOS and GMAC – will grant a two-year extension to its £50m revolving credit facility, which expires at the end of this year. Mr Grimsey, the retail veteran responsible for reviving DIY chain Wickes in the 1990s, said that Focus would then be able to take market share away from rivals Kingfisher’s B&Q and Home Retail Group’s Homebase and push ahead with its store refurbishment programme.

Company Voluntary Arrangements were relatively obscure until April this year when JJB Sports, the sportswear chain, became the first listed company to avoid administration through a CVA.