Troubled footwear retailer Clarks has clinched a £100m cash injection, but only on the condition that it launches a company voluntary arrangement.
Hong Kong’s LionRock Capital plans to acquire a majority stake in the 195-year-old chain, while the Clark family would remain a key shareholder.
The CVA proposals include moving 60 of its 320 stores to nil rent, as well as a shift to a turnover-based rent model and rent reductions.
LionRock’s investment is subject to a shareholder vote taking place next month.
Philip de Klerk, interim chief financial officer at Clarks, said that no stores will close immediately and that suppliers and employees will continue to be paid.
He said: “In order to address the permanent shift in structural shopping behaviour as a result of the Covid-19 pandemic, the CVA is being launched out of absolute necessity.
“The proposal to creditors outlines a combination of a reduction of rent and a move to rebase Clarks’ rental cost base through a turnover-based model that aligns to future performance and reflects the wider retail market.”
Gavin Maher, partner at Deloitte, said: “The retail trading environment in the UK has been under pressure for some time. The Clarks UK business has been faced with weaker consumer confidence and reduced footfall.
“In the midst of Clarks undertaking its transformation plan, Covid-19 exacerbated these challenges, with working capital and turnover significantly impacted, placing acute liquidity pressure on the group.
“The turnover rent model better aligns the risk and reward of trading during these uncertain times, and the CVA, together with the proposed investment from LionRock, provides a stable platform upon which the management’s transformation strategy can be delivered.”
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