Fears For Wrexham’s BHS As Retailer Announces 87 Stores At Risk

High street retailer BHS have threatened to close 40 stores unless landlords ‘substantially reduce rents’, with a further 47 requiring rent reductions to remain ‘viable’.

The company, which has been a well-known brand on the British high street for almost 90 years, employs thousands of employees across 164 stores nationwide – including a large store in the town centre.

However concerns about the future of the company have been brewing for some time, with the cash-strapped company sold off for £1 last Spring.

In the past few days the company signed a company voluntary arrangement (CVA), a type of insolvency proceeding which allows a company with financial difficulties to reach a deal with landlords and creditors in an attempt to reduce its liabilities.

Three options have been put forward in the CVA proposal, which divided the company’s store portfolio into three main categories, based on the ‘commercial viability and strategic importance’ of each site.

Of the 164 stores, plans at the moment say a total of 77 will be retained at the current rents – however for the next three years, rents will be paid monthly as opposed to quarterly.

47 properties have been deemed viable only if a reduction in rent is obtained by 50-70%. The remaining 40 properties, which are at risk of closure, would need a ‘substantial’ reduction in their rents to continue trading.

Wrexham has one longstanding BHS store on Henblas Street, however it has not been confirmed which of the three categories the town’s store falls into.

Last night information emerged via TheGuardian.com noting the owners of BHS have taken an £8.4m loan out of the company, a move likely to rankle with landlords asked to cut rents. The article also mentions a pension deficit of £207m.

Will Wright, restructuring partner at KPMG and proposed ‘supervisor’ of the CVA, said: “For almost 90 years, BHS has been one of the most iconic brands on the UK high street, but in recent years has seen its profitability decline as it has sought to respond to changing customer behaviours, increased competition and the rise in omni-channel retailing.

“Today’s CVA proposals are one facet of a wider turnaround plan, and specifically tackle one of the business’ largest fixed costs, the onerous lease arrangements across its UK-wide store portfolio.

“While the company’s store estate is located across favourable retail locations, a number of these leases are unsustainable, predicated on terms which were originally negotiated some decades ago. With the support of its lenders, shareholders and landlords, the company will be able to reshape its debt and operational structure to a model more suited to today’s multi-channel retail environment. The company needs to secure at least 75% creditor approval for these CVAs.”

Brian Green, restructuring partner at KPMG and second proposed supervisor of the CVAs has said that the over the next ten months negotiations with landlords will take place in a bid to reduce rents.

Mr Green added: “BHS currently has a total of 164 retail sites across the UK. Importantly, none of these stores will close on day one, and suppliers will continue to be paid on time and in full. The landlords of a total of 77 of the most viable stores will be retained at current rents which will be paid monthly as opposed to quarterly for three years. A further 47 stores have been identified as being viable at a reduced equivalent monthly rent of either 75% or 50%.

“The remaining 40 stores will continue to trade for a period of a minimum of 10 months whilst negotiations with landlords are undertaken to reduce the rents substantially. Where rent reductions are achieved, these stores will remain open. It is hoped that the store closure number will be kept to a minimum.”

A detailed CVA proposal document is expected to be made available to BHS creditors in the next few days. The creditors will vote on the CVA on 23 March 2016. KPMG will spend the next three weeks in talks with creditors to ensure they understand the full detail of the proposal.

It appears there will be no public comment on the status of stores until future information is released.

(Pic: BHS in Wrexham earlier today)