Court rules Sixty CVA was unfair to landlord

A High Court judge has rejected a company voluntary arrangement (CVA) entered into by the owners of the Miss Sixty fashion chain, upbraiding the company’s administrators and saying that the deal was unfair to one of the chain’s landlords.

Sixty UK, the owners of the Miss Sixty and Energie chains, went into administration in 2008, and had been seeking a CVA. That would have allowed the company to avoid liquidation and to continue trading by restructuring its debts and making arrangements with creditors.

By the terms of the CVA proposal, Sixty Spa, Sixty UK’s Italian parent, would have been able to relinquish the rent guarantees it had provided for two stores occupied by Energie and Miss Sixty in Liverpool’s Metquarter shopping centre. In return, the landlords of the Metquarter stores would have received a one-off payment of £300,000.

CVAs are increasingly used by distressed retailers to gain breathing space. But the process is vexed as landlords often lose out. Stylo, owner of the Barratts shoe stores, failed to gain approval of landlords for a CVA in 2008. Retailers such as JJB Sports, Blacks Leisure and Focus DIY have arranged CVAs, allowing them to pay reduced rents or to close underperforming stores.

Sixty UK’s CVA proposal was supported by more than 75 per cent of Sixty UK’s creditors, but the Metquarter landlords opposed it, arguing leases had five years to run. They claimed they would have foregone rental income of about £4m.

On Friday in the High Court, Mr Justice Henderson said the CVA was prejudicial to the Metquarter landlords.

“[The] administrators…seem to have lost a proper sense of objectivity and they allowed themselves to side with Sixty against the interests of the guaranteed landlords of the closed stores. ”

Peter Hollis, one of the supervisors of the CVA for Sixty UK, said: “We are of course disappointed with the conclusions reached by Mr Justice Henderson.

“[During the CVA], there were on-going settlement negotiations between the landlord and the guarantor. We will now work to bring the CVA to a conclusion.”