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JJB Sports - What now for tenant insolvencies?
On 27 April 2009, creditors of JJB Sports (JJB), the majority of whom were landlords, voted by an overwhelming majority of 99.91 per cent to approve JJB's company voluntary arrangement (CVA) proposal. JJB's shareholders also voted in favour at their own meeting on 29 April 2009 by a similar majority. Many commentators see this as a landmark event, the success of which may have a significant bearing on how struggling businesses now deal with trading difficulties and onerous lease liabilities caused by the current downturn. The impact of this on landlords should not be underestimated.
With one notable exception, the flurry of tenant insolvencies seen in the last few months has involved tenants going into administration, on a so-called 'pre-pack' basis. The business then emerges immediately after administration in a leaner, more focused form, free of onerous liabilities and with the viable parts of the business preserved, generally at the expense of unsecured creditors (including some landlords). The JJB CVA now represents a realistic alternative to a pre-pack administration, and has found favour with the vast majority of landlords affected by it.
Does the JJB experience herald a new dawn for the turnaround of struggling multi-site businesses, particularly retailers? Is the pre-pack now dead?
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01 May 2009