Arcadia, which owns Topshop, Dorothy Perkins and Miss Selfridge, also intends to close 23 stores in the UK and Ireland as part of the plan, putting 520 jobs at risk.
In an attempt to win support for the proposals, creditors to Arcadia have been offered a 20 per cent stake in any future sale of the business if they agree to rent reductions and new lease terms. This is double the amount that had been on the table before.
However, last night the Pensions Regulator was said to be set to oppose the plans, while representatives of landlords questioned whether the offer would be enough to win their backing.
Arcadia is trying to garner support from creditors for a series of company voluntary arrangements. A CVA is a form of insolvency used by struggling retailers to cut debts and close stores. The downturn in the company’s fortunes was underlined last month when Leonard Green & Partners, an American private equity firm, sold its 25 per cent stake in Topshop and Topman for $1. It was said to have paid £350 million in 2012.
The UK shops that will be shut are in Aberdeen, Ashton-under-Lyne, Bedford, Cheshunt, Bluewater, Fareham, Glasgow, Luton, Newcastle, Nuneaton, Reading, Salisbury, Southend, Stirling, Swindon and York. In Ireland, stores in Cork, Dublin and Galway will close.
The remaining 349 sites will not be affected. Arcadia said that “every effort will be made to redeploy affected colleagues”.
All 11 Topshop and Topman stores in America have been earmarked for closure. Sales in the US instead would be made solely online and through wholesale partners. Sir Philip opened Topshop’s first US shop in New York in 2009 alongside Kate Moss, the model.
Lady Green, Sir Philip’s wife and Arcadia’s ultimate owner, will invest £50 million in equity to fund a turnaround of the business, an upgrade on a plan to instead provide the same amount in secured debt.
Arcadia’s contributions to its two largest pension schemes would also fall from £50 million to £25 million a year for three years. Lady Green would provide £25 million a year over the same period to make up the shortfall, Arcadia said, and would make an additional £25 million “contribution”. Additional security over Arcadia’s assets has also been offered.
It was unclear last night whether creditors would vote in favour of the plans at a meeting on June 5. Three quarters need to approve the plan for it to pass.
Ed Cooke, chief executive of Revo, which speaks for retail landlords and retailers, said: “When you look at what other retailers have put into their businesses, it doesn’t look like very much. The sense I’m getting from investors is that there’s not a lot of appetite for Arcadia equity.” PJT, which is representing a group of landlords thought to include Hammerson, British Land and M&G, said: “There have been substantial improvements made to the CVA announced today which benefit all landlords, but there are still areas that need further clarity.”
The Pensions Regulator, which has the voting power to block the CVAs, objected to the details of the restructuring, concluding that the £100 million investment from Lady Green would not be enough to protect pensioners, Sky News reported.
Arcadia said it would offer £40 million in compensation via a “compromised creditor fund” for retailers affected by leases being broken or altered.