Landlords of BHS stores are likely to face more gruelling rent negotiations with one of three retail heavyweights – Mike Ashley, Phillip Day or Christo Weiss.
The three prospective buyers, owners of Sports Direct, Edinburgh Woollen Mill and New Look respectively, are among a pack of businesses interested in buying BHS.
If a deal is agreed, BHS will continue to trade. BHS is still taking stock from suppliers.
The UK pension protection fund is expected to take responsibility for the £571m deficit in the pension fund, which will dramatically enhance any prospective buyers’ ability to turn BHS’s 164 shops back to profitability.
A buyer will take the licence to trade the shops from the administrators and the leaseholds of the entire portfolio, including the long leaseholds previously owned by BHS.
A new owner would also inherit the lease liabilities due to landlords, but would be in a position to renegotiate. A prospective buyer could cherry pick shops and only choose to stay if rents are reduced.
This is most likely to happen in the 40 shops that were in category three of KPMG’s CVA arrangement prior to administration, deemed the most unprofitable.
If a landlord is unwilling to agree to reduced rents then the assignment of leases would be explored.
If landlords and a new owner are unable to come to sufficient rent reductions and lease terminations, then it could lead to another CVA.
Administrator Duff & Phelps instructed Savills to advise on BHS’s property portfolio on 3 May and wants to agree a deal which sees as many BHS stores as possible survive.
Negotiations on whether or not the rents agreed in the CVA will remain in place are ongoing.
| THE BUYERS – who might landlords be dealing with next? | ||
|---|---|---|
Mike AshleyOwns Sports Direct Net worth £1.5bn Retail experience Built a single sports shop into the UK’s largest sportswear retailer with 400 shops. |
Christo WieseOwns New Look, Virgin Active Net worth £4.2bn Retail experience The 73-year-old South African bought Virgin Active for £682m and New Look for £1.9bn and launched fashion chain Pep & Co in the UK. |
Philip DayOwns Edinburgh Woollen Mill, Peacocks Net worth £750m Retail experience Rescued Peacocks from collapse, buying 388 shops and saving 3,000 jobs in 2012. |
COMMENT
When Retail Acquisitions, fronted by Dominic Chappell, bought BHS for £1 in 2015, it came up with a business plan that seemed viable, despite the backdrop of a tough and changing British retail landscape.
It planned investment into a revitalised fashion offering, food courts and an improved online sales platform. The problem was none of this happened.
With the £571m pension fund deficit being handled by the pensions regulator, a new business has the opportunity to bring the portfolio back to profitability and invest in all the aspects of the business that the previous owners failed, or decided not, to.
It will be a long process but, tarnished image aside, there could still be hope for one of Britain’s oldest retailers.
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