The CVA roadshow

The issue of CVAs has prompted a fierce debate on the pages of Retail Week over the last few weeks.

Many successful retailers, notably our distinguished columnist Lord Kirkham, think the process is profoundly unfair because it allows failing retailers to get out of their obligations to landlords and suppliers.

Others - notably KPMG, whose head of restructuring Richard Fleming launched an impassioned defence of the system in response to Kirkham’s article - say it is a good system which saves jobs and businesses.

There’s no doubt that CVAs have been successful in saving businesses which do have a future but needed a major restructuring in order to get there. JJB Sports is the most notable example, and Blacks - the fate of which will be determined by its creditors next week - is a business which should have a future if it can get it’s proposal through. It probably will because in general CVAs are an infinitely preferable prospect for landlords than the alternative of an administration.

But talking to many on the property side at BCSC last week there was a fear that the success of CVAs like JJB’s will embolden other retailers to use the process when a business has a collection of stores, possibly a sub-brand, which aren’t doing the business. Someone described to me that there is a “roadshow” of the accountancy firms trooping around retailers head offices trying to sell the concept, and the story must be quite a compelling one to retailers labouring with a tail of badly performing stores.

What that means is that we could see a rush of CVAs next year which are less about preserving businesses which are genuinely on the brink and more about helping viable retailers get their house in order and focus on their best stores. If that proves to be the case, the landlord community would be well within its rights to start taking a firmer line.