Recent retail woes have been well-documented. The resulting retail restructurings and administrations have also hit headlines with increasingly frequency.
We know the number of retail restructurings has spiked, but are they changing in nature, too?
It’s worth saying that the law has not changed. The Insolvency Act 1986 still stands and provides businesses with lots of flexibility to restructure their affairs.
However, it’s evident that restructurings, under the dominion of lawyers and insolvency practitioners, have sought to test the boundaries of the legislation. CVA proposals have become increasingly sophisticated, and courts have been called upon to decide whether these are valid.
Alongside this, the relationship between debtor and creditor has also evolved. Landlords, who bear the brunt of financial compromises in CVAs, are now using their collective bargaining power to achieve better outcomes and are demanding more from debtors. Landlords are also becoming more involved in the affairs of their retail tenants, with agreements leaving them intertwined long after the CVA has been voted through.
Faced with a CVA proposal from multi-site tenants, landlords are increasingly working together to elicit the best deal. Indeed, there have been a number of high-profile incidences of tactical voting in recent CVAs, the latest example being Arcadia in May this year.
Greater bargaining on the part of landlords is partly because the maths for passing a CVA has become more complex. Unlike ten years ago, when retailers assess the health of their store portfolio, stores are not simply deemed to be good or bad. Now, stores are assessed on a sliding scale. This potentially leaves landlords with multiple sites that are in different categories of profitability.