In Order To Avoid Bankruptcy Risk, Topshop Parent Company Will Use Equity To Get Rent Relief.

Topshop's parent company, British fashion retail group Arcadia, announced on Wednesday that the Company Voluntary Agreement (hereinafter referred to as "CVA", similar to the US bankruptcy protection) has been approved by more than 75% of the owners and creditors.

Arcadia put forward CVA to owners and creditors at the end of May (see "ornate ambition" report: deep dilemma, Topshop parent company, UK Arcadia group or will abandon all international market business). According to the agreement reached between the two sides, 194 Arcadia stores will receive rent relief in the next three years. In exchange, owners and creditors will get a maximum 20% stake in Arcadia group.

However, some owners and creditors are not satisfied with the terms of exchange, so the rate of rent relief will be 25% to 50%, lower than the 30% or 70% originally proposed by Arcadia.

The rent of Topshop flagship store in London will be reduced from 50 million to 25 million pounds. In exchange, the flagship store will be mortgaged to one of the group's main creditors, the Pension Protection Fund (Pension Protection Fund).

As part of the agreement, sir Philip Green, the founder of Arcadia and his wife Tina Green, will add an additional 50 million pounds to the group.

They just invested 50 million pounds in Arcadia just a few months ago.

Arcadia will close 23 UK stores, lay off 520 people, and further shut down 25 UK stores in the future, laying off 500 people.

If CVA fails to pass, Arcadia will be forced to seek sale, and some of its businesses will go bankrupt, which will cause up to 17000 people to lose their jobs.

"This agreement gives us a more solid foundation for our future.

Starting today, we can create a solid platform for the group to reduce costs and drive sales of digital and wholesale channels. "

Arcadia CEO Ian Grabiner said on Wednesday: "I have great confidence in Arcadia. We can provide consumers with the best multi-channel experience, provide the fashion experience of their needs, and ensure our long-term growth in the future."

Arcadia group owns many fashion retail brands such as high street brand Topshop, Topman, women's clothing retailer Dorothy Perkins, big size women's clothing retailer Evans, high street department store Miss Selfridge, snowboard manufacturer Burton and women's wear retailer Wallis.

Arcadia has 566 stores in the UK and has 1170 stores in 36 other countries around the world.

Over the past three years, they have closed over 200 stores.

Arcadia said that in the past three years, the rise in the British minimum living standard and the decline in the sterling exchange rate have resulted in the increasing cost of imports and the direct result of the failure of Europe.

In addition, Arcadia believes that the flow of electricity to consumers has also had a negative impact on the group and will enhance digital operation in the future.

At the same time, competitors cut prices and attract consumers, and the high return rate also dragged down their performance.

At the end of April, Arcadia reached an agreement with HSBC (HSBC), which will provide guarantees in the process of Arcadia restructuring.

(see "ornate ambition" report: Topshop parent company, British Arcadia group get more breathing facilities, reorganization work is supported by HSBC credit guarantee)

The future is still dangerous.

Although CVA has won valuable time for Arcadia, analysts are still not optimistic about the future of the British retailer.

"They still have a tough battle to fight," said Retail Economics, a consultancy.

Just closing dozens of stores does not guarantee Arcadia's long-term development.

They need a more concise business model, including refined brand portfolios and fewer employees, while investing in brand positioning and store customer experience. "

Chole Collins, an analyst at GlobalData, a consultancy, said: "Arcadia's brands such as Topshop and Topman are still very appealing in the millennial generation, but other brands, such as Miss Selfridge and Dorothy Perkins, are not competitive in the market, which makes many owners worry whether they can make use of the existing retail space to ensure long-term and stable operation.

Chole Collins believes that Arcadia will pay more attention to the sales of digital channels in the future, so that the decision of Topshop and Topman to enter the UK electricity supplier Asos is "very smart, which can increase the scope of brand sales, especially in the international market".

But this is not enough to ensure the success of Arcadia in the future.

Chole Collins said: "Arcaida has invested 60 million pounds in the digital sales network, and this investment must ensure that they can compete with ASOS and other competitors.

On the other hand, their $75 million investment in the physical store network is probably just a drop in the bucket.

After closing nearly 50 stores, they still have about 500 stores in the UK, most of which are not competitive enough.