Sir Philip Green is considering closing down overseas stores as part of a rescue restructure for his retail empire, which could be announced as early as this week.
Arcadia, the group led by Green that owns several ailing high street fashion brands including Topshop, Miss Selfridge and Wallis, said it needs to secure a deal involving about 50 UK store closures, rent cuts and a reduction in pension fund payments.
If a deal cannot be agreed well before the group’s next rental payment in late June, Arcadia could face administration.
As part of the rescue efforts, it is understood the group is attempting to refinance a £300m mortgage on Topshop’s £400m Oxford Circus building in central London, which also houses Nike. The remortgage could potentially release cash needed to satisfy the group’s landlords and pension trustees, who want Green to pump more money into the business and its pension fund before they will agree to back a rescue deal.
Arcadia had offered to hand over the Topshop building to the pension fund trustees as part of a deal under which it wants to slash annual payments into the scheme to £25m from £50m. But the hefty mortgage and difficult property market mean the store is not seen as the gold-standard asset it once was and trustees have held out for a better offer.
Landlords have also told Arcadia they want significantly more investment in stores than the £100m in loans Green has offered before agreeing to closures and rent cuts of an average of 30% on hundreds of sites. Some also want a larger share in the proceeds from any sale than the 10% initially put on the table.
While not all landlords agree on these demands, Green and his advisers have been locked in talks for weeks in an effort to win over enough backers to secure a deal.
The complex structure of the Arcadia business means it has to implement up to eight separate insolvency procedures known as company voluntary arrangements (CVAs). Each of these must be approved by 75% of creditors, which means landlords have more power over the outcome than in almost any other similar deal attempted by retailers in recent years.
Several industry experts said landlords were becoming more likely to vote against CVAs after a series of similar procedures by Debenhams, New Look, Mothercare and Carpetright had left them out of pocket.
“There is a lot of animosity around,” said one. Another said Green faced particular problems in winning over landlords because his family had taken more than £1.5bn out of Arcadia’s parent company, Taveta, over the years, including a £1.2bn dividend in 2005, and nearly £220m in interest and loan repayments relating to the now collapsed BHS chain since 2009.
“Green’s name is toxic at the moment,” the property source said. “I think Arcadia is easily going to be the most controversial [CVA deal] because of the scale of the business, the behaviour of the owner and the impact on local communities.”
Green, who has not been in the UK since October, is keen to stabilise and potentially offload his empire, which he bought for £850m 17 years ago. The business is struggling as shoppers have reined in spending on clothing and turned to rivals such as Asos, Zara and H&M. Arcadia’s group sales fell 10.5% to £1.7bn in the year to August, according to the Sunday Times, which first reported Green’s offer to close his overseas business.
The group’s overseas businesses could be put up for sale but more than half the 1,000-plus overseas stores are franchise operations. Only Topshop outlets in Ireland, France, Germany, the Netherlands, the US and Australia are run directly by the company.
In Australia there are only two stores and in the US only 11 standalone stores, alongside concessions in the Nordstrom department store chain. The overseas businesses are unlikely to attract a buyer because the stores are leased and many markets are thought to be loss-making.