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The future of Sir Philip Green’s empire is hanging in the balance as industry insiders say a planned rescue may struggle to win approval from landlords.
Board directors of Green’s Arcadia group, which owns a string of high-street chains including Topshop, Topman, Miss Selfridge, Dorothy Perkins and Wallis, were locked in an all-day meeting on Tuesday attempting to agree a way forward for the group.
Arcadia’s advisers at Deloitte are understood to be pushing ahead with plans for an insolvency process that would involve rent cuts and the closure of about 50 of the group’s 570-plus stores. Details could be announced within days.
But industry sources said Arcadia may struggle to secure enough support for the restructure, known as a company voluntary arrangement (CVA), which requires approval from 75% of landlords. Arcadia is likely to want to gain approval for changes before its next quarterly rent day at the end of June.
Green has reportedly offered to give landlords a stake in the business and to invest about £100m in revamping remaining stores if they back a deal.
One source said: “With a business backed by a high net worth individual people think: ‘Why should I take a haircut?’ It’s a tougher sell with a high-profile figure.”
Another source said Green was facing a backlash from property owners who had already been forced to swallow rent cuts and store closures after CVAs by a string of high-street chains including New Look, Carpetright and Mothercare. “Landlords are sick of CVAs … Particularly with Green, they are not going to look kindly on him saying: ‘I can’t afford the rent’ when he is sailing around in a £100m yacht.”
Another expert source agreed Arcadia was unlikely to be able to secure the backing of enough landlords. He suggested the group might nevertheless risk putting a CVA forward as the likely alternative was administration.
Arcadia has bought back a 25% stake in its Topshop chain from the US private equity firm Leonard Green and is aiming to halve annual payments into its pension fund from £50m to £25m in a rescue plan designed to cut costs, and update to cope with online competition.
Green’s retail empire has suffered falling sales as it struggles against online competition from Asos and Boohoo, while shoppers have switched from buying clothes to other pursuits.
The restructuring experts Jamie Drummond Smith and Peter Bloxham recently joined the boards of Topshop, Arcadia Group and Green’s holding company Taveta Investments to help devise a rescue plan.
But Green faces an uphill battle in his attempt to put Arcadia on a firmer footing.
Regulators are scrutinising the attempt to cut pension contributions just two years after Green agreed to increase annual payments from £25m to £50m in order to tackle a pension deficit which stood at £727m last year.
Landlords, regulators and pension fund trustees have also been sceptical about taking a haircut as Arcadia’s parent company, Taveta, paid £25m in 2017 to Green’s wife, Tina Green, the group’s owner who is based in the tax haven of Monaco, in relation to loan notes linked to the collapsed department store chain BHS.
In 2005, the Green family also banked a £1.2bn dividend from Arcadia, the biggest payout in corporate history at the time.
Green’s reputation was shredded by the high-profile collapse of BHS, which led to the loss of 11,000 jobs. He put more than £300m into the the department store’s pension fund after widespread public pressure, including a threat to withdraw his knighthood.
More recently, Green has faced scrutiny over accusations of inappropriate behaviour by former staff members, which he denies.
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