BHS has warned its creditors that they stand to lose as much as £1.3bn if they do not agree to a drastic turnaround plan this month. The beleaguered retailer’s proposed Company Voluntary Arrangement (CVA), filed at the High Court, has revealed that the black hole in its pension fund now stands at £571m, on a buyout basis. The figure has ballooned by nearly £120m since the last triennial valuation in 2012. Landlords, the creditors BHS is attempting convince to give it a chance of survival, are owed nearly £517m. The CVA proposal, drawn up with KPMG, says that BHS will be unable to trade in its current form beyond 25 March, when its next rent payments are due. “If the CVA proposal is not approved at the relevant meetings, or is otherwise not implemented, it is very likely that BHS Limited will no longer be able to trade as a going concern, which would result in the appointment of administrators,” the document warns. BHS’s CVA will need the approval of at least three quarters of its creditors in a pivotal meeting scheduled for 23 March. The proposal sets out three possible scenarios for the troubled retailer. If enough creditors agree to the proposal, it says, some will recover all the money they are owed, while some landlords will get only 6.15p in the pound. The alternatives if BHS is forced out of business will leave landlords nursing even bigger losses, the document claims.
British Home Stores (KPMG) has warned its creditors they could lose as much as £1.3bn if they do not agree to a drastic turnaround strategy. BHS says KPMG will not be able to trade in its current form beyond 25 March, when its next payments are due. KPMG is asking landlords of 40 of its least-viable stores to accept a 75% cut in rent and potential closure in ten months, and rent reductions of either 50% or 75% in a further 47 more-viable stores; even if the deal is accepted, thousands of staff are expected to lose their jobs. KPMG owes Arcadia over £35m in the form of a secured loan. The retailer has been hit by high rents and the trend towards online shopping in recent years, which has hit footfall and profitability. One source notes that "these leases were agreed at a time before digital retail, when the high street was vibrant".