Best Hope for Survival - at BHS

High Street
By Lauren O'Brien, TPS Level Controller

8 April 2016

The high street has witnessed a dip in profits as more and more consumers switch to online shopping, and the knock-on effects continue to show.

BHS has been a high street staple for a number of years, but, like Woolworths before them – they are currently struggling.

Purchased for merely £1 in 2015 from Philip Green, the new owners have been trying to turn the business around. The case of the administration of Woolworths is discussed in some detail in the Afin course. BHS, however, is going down a different route by pursuing a CVA (“Company Voluntary Arrangement”).

As Afin students will be aware – the terms of a CVA will vary from company to company, and requires 75% of the creditors and 50% of the shareholders to back it. Some of the examples we discuss in Afin are that creditors might accept less pence in the pound for their debts, or they might accept a further delay before receiving their funds.

This BHS example shows how versatile the CVA scheme can be. The retailer is particularly struggling with rent bills and, as such, their landlords have agreed to a cut in rent in some BHS stores, to allow the company to continue.

Why would the landlords agree to this?

Well, I think it’s largely because they know that the BHS stores occupy a large space in many locations – a space that will potentially be hard to fill with another paying tenant given the fall in high street trading in recent years. And of course there is the potential that BHS will turn their fortunes around, and be able to pay increased rent in the future.

What’s interesting about this case is that the largest creditor – being the BHS pension fund – waived their voting rights in relation to this decision, and as such they allowed the landlords and other creditors to decide on the merits of this CVA. (But with a pension deficit of £571m, there are no doubt separate discussions ongoing in relation to the pension fund.)

With 10,000 employees employed by BHS across the country, it’s a situation that will need to be monitored very closely.

Image credit: Jason Batterham /


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