Blacks Leisure set for deal to escape administration

Blacks Leisure looks set to reach an agreement that will allow it to back out of leases on 101 stores.

The outdoor goods retailer’s landlords, which include Land Securities and British Land, will vote on the deal on Monday.

A vote to accept a Company Voluntary Agreement (CVA) could stop Blacks from going into administration, saving 290 shops and up to 4,000 jobs.

CVAs have already helped JJB Sports, Discover Leisure and Focus DIY to steer clear of administration in recent months.

Both the British Property Federation and KPMG, which is helping to restructure the company, said on Sunday they were confident that it would pass the 75 per cent threshold of support needed from creditors, including its landlords, in a vote on the terms of a CVA on Monday.

Richard Fleming, KPMG’s UK head of restructuring, described the move as a “commercial no-brainer”.

If the landlords agree, Blacks will only be obliged to pay a maximum of six months’ rent on its outlets. It will remain liable for rates until the property is re-let or until the lease expires.

Blacks has already closed the 101 stores amid poor trading conditions. It needs to stop paying rent for the shops to meet a restructuring arrangement with its lender, Lloyds Banking Group.

Lloyds agreed to freeze the retailer’s banking covenants in September after Blacks warned it would breach them.

“I think in the end the CVA will be considered the lesser of two evils,” said Liz Peace, chief executive of the BPF, which represents landlords.

But the BPF was also concerned that landlords may sometimes take a loss when a company restructures only to watch the company come back from the brink and profit. It cited Clinton Cards, which made a £13.5m profit from buying back the profitable stores in the Birthdays chain after closing unprofitable sites a month before.

Ms Peace said: “With the average existing retail lease lasting over 12 years, Blacks would walk away from many hundreds of years’ worth of rent if the CVA is passed. This hit will be taken solely by the landlords – many of whom are owned by the public and its pension funds.”

“Landlords may huff and puff about losing money, no one likes losing money. But it’s nothing or something quite considerable – six months’ rent and paying the rates,” said Mr Fleming.

“Paying the rates is a huge issue as it’s one thing landlords not taking any money in, it’s another them opening their own wallets and paying out. It could be six months until these shops are retenanted, or it could be five years.”