Creditors approve Homebase rescue
HOMEBASE has won approval for a rescue deal which will lead to the closure of 42 of its 241 stores, with the loss of up to 1,500 jobs.
Nearly 96 per cent of creditors backed an insolvency procedure known as a company voluntary arrangement at a London meeting, without which it could have collapsed into administration.
Under the proposal, the DIY retailer has also secured rent reductions from landlords of up to 90 per cent on 70 stores that will remain open.
The 42 outlets earmarked for closure will be phased out by the first quarter of next year.
Hilco, the turnaround specialist which bought Homebase for £1 from Australia’s Wesfarmers, will now look to raise about £140million through debt and equity funding.
Concessions such as Laura Ashley and Habitat, which exited Homebase during Wesfarmers’ disastrous two-year ownership, could be set for a return as Homebase looks to win back shoppers who defected as Wesfarmers began rebranding the chain as Bunnings stores, its successful format Down Under.
Wesfarmers threw in the towel after running up a half-year loss of £97million.
Homebase chief executive, Damian McGloughlin, said: “We are pleased that an overwhelming majority of our creditors, including such a proportion of landlords, have supported the plans laid out in the CVA.
“We now have the platform to turn the business around and return to profitability.
“We can look to the future with great confidence, and we will be working closely with our suppliers to capitalise on the opportunities we see in the market in the UK and Ireland.”
The use of CVAs by struggling retailers and restaurants has raised concerns among landlords that they are treated unfairly compared with other creditors.
Simon Underwood, partner and insolvency specialist at accountancy firm, Menzies, said: “While the announcement is positive news for Homebase, the negative reception from a number of landlords is no surprise. Whereas many of the company’s creditors will benefit from the arrangement, receiving payment in full, landlords often receive the raw end of the deal, facing significant cuts to rental income or empty properties.”
He added: “Moreover, as the collapse of Toys R Us into administration revealed earlier this year, CVAs are not always successful in transforming the fortunes of ailing retail chains.”