Blacks unveils deal to avoid administration

Blacks Leisure has unveiled the terms of a potential deal with landlords that could shield the troubled outdoor goods retailer from administration, saving more than 4,000 jobs and preserving 290 stores.

Following in the footsteps of fellow retailers JJB Sports and Focus DIY, Blacks hopes it can exit the leases on lossmaking stores through an insolvency procedure called a company voluntary agreement.

Under the proposed CVA, Blacks said landlords of 101 stores would be offered six months’ rent and the payment of rates until leases expire or the stores are leased again.

Blacks needs to quit the stores in order to meet a restructuring arrangement with its lender, Lloyds Banking Group, which agreed to freeze the retailer’s banking covenants in September after Blacks warned of an impending breach.

Landlords for Blacks’ remaining 291 stores would also be asked to move to a monthly rent payment schedule for 18 months.

The plan could, however, collapse if more than 25 per cent of landlords vote against the CVA at a creditors’ meeting on November 23.

Liz Peace, chief executive of the British Property Federation, said her members would take a careful look at the proposals and make a decision that took account of the interests of their own shareholders.

Ms Peace warned: “Unfortunately recessions are tough and there will inevitably be business failures and financial loss. While landlords will always want to be as flexible as possible and support their tenants where they can, this does not mean that they should be asked to bear a disproportionate share of the pain.”

Yet Richard Fleming, head of restructuring at KPMG, said the feedback from landlords so far had been “very positive”.

“The reality is there’s a lot less carnage involved with a CVA than there is with a routine administration…The landlords we’ve seen so far have been very positive because fundamentally they understand the commercial rationale,” said Mr Fleming.

The group has also negotiated new banking facilities of up to £42.5m ($69.8m) with Lloyds. In return, the bank will receive warrants allowing it to acquire new shares worth approximately 5 per cent of the existing share capital.

The new facilities will only be available if the CVA proposal is approved, however.