A couple of high profile companies who entered into company voluntary arrangements (CVA) due to financial problems are set to emerge with changed business plans.
CVAs have been used by DIY store Homebase and haulage firm Premier Logistics to remain in business this year. Axbridge Chamber of Commerce member Ian Carrotte of ICSM Credit said: “CVAs allow a company to agree with its creditors to pay its debts over a set period of time. But for the arrangement to go ahead, creditors representing 75% of the debts must approve the proposal.”
Homebase says it will come out of its CVA later this spring and around 18 months early having reshaped its operation. To cut costs it has closed 77 stores and renegotiated rents on 75 stores although it has declined to say how they have reduced an estimated £180m in overheads.
Ian Carrote said despite this the news should be greeted with caution as Mothercare and Carpetright came out of CVAs only to collapse later on. He said Premier Logistics vowed to go back to basics in its attempt to continue trading which at least suggested the firm had admitted it had over reached itself – a common fault of over ambition.
Chris Tindall writing in Motor Transport noted: “The haulier said it is now ready to compete on a level footing after restructuring its finances in 2018 via a CVA in the face of a £5.7m shortfall to its creditors. HMRC forced through a revision to the original terms, which would have meant the company making monthly contributions over five years.
“However, Premier Logistics said this term was later reduced as part of a settlement accepted by creditors and HMRC and the CVA ended in February. The Leicestershire company said it had concentrated on its core services, stripped back its assets, separated out non-profitable contracts and focused on ‘a core group of loyal customers.’”
Last year Aradia was saved with a three year CVA meaning high street stores Topshop, Miss Selfridge and Wallis will survive but in reduced numbers. 25 stores with close and 500 workers will lose their jobs.
Ian Carrotte warned members of ICSM Credit and businesses in general to be on high alert for famous firms asking to extend credit or simply not paying suppliers on time. He said: “As soon as a company fails to pay an invoice on time the warning lights should start flashing. The problem we see over and over again is for suppliers to be told by their client that they just need a little more time – or even if they don’t accept the excuses they won’t get any more work.”
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