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Billionaire Philip Green’s Empire Hanging on Landlords’ Vote

Billionaire Philip Green’s Empire Hanging on Landlords’ Vote

(Bloomberg) -- Retail billionaire Philip Green finds out today whether creditors will force him to give up control of the sprawling empire he built up over years around well-known brands such as Topshop.

Creditors to Green’s Arcadia Group Ltd. meet in London this afternoon to vote on its proposals to cut rents and close stores in order to ensure its survival after a consumer shift to online shopping has decimated the profits of traditional retailers. Arcadia employs about 18,000 people worldwide.

The process is a sign of how far the shopping tycoon has fallen. Green was once the king of British retail and among the nation’s richest people, with a net worth of $6.6 billion six years ago, according to the Bloomberg Billionaires Index. His fortune is now closer to $2 billion, and much of that comes from Arcadia dividends.

Billionaire Philip Green’s Empire Hanging on Landlords’ Vote

“Whatever the outcome today, this marks a huge fall from grace of Philip Green as a retailer,” said Richard Hyman, an independent retail consultant. “His SOS to his creditors reflects an acknowledgement that he has lost control of his empire. Lowering costs is likely to buy time rather than lead to a meaningful turnaround.”

The vote was originally scheduled for last week but postponed at the 11th hour when it became clear landlords that own buildings housing some of the 566 shops and department stores across the U.K. and Ireland were likely to reject the deal.

Arcadia, which owns brands including Topshop, Dorothy Perkins and Miss Selfridge, has since cut the proposed rent reductions in an attempt to woo the landlords. The retailer plans to use a series of company voluntary arrangements, the same U.K. procedure used recently by some of Arcadia’s peers including department-store chain Debenhams and fashion outlet New Look.

The group told creditors last month that it was “highly likely, either immediately or after a short time period, to enter into insolvent administration or liquidation” if the vote doesn’t pass. The company needs at least 75% support from creditors for its plans which involve closing 23 stores and cutting rent at 194 sites.

Arcadia’s Australian business fell into administration two years ago and it’s retreating from the U.S. by closing all eleven of its Topshop and Topman stores there.

Rent Concessions

The company has already secured the support of pension trustees, trade creditors and “a significant number of landlords”, chief executive officer Ian Grabiner said last week. To win over the rest of the landlords, Arcadia revised down its request for rent reduction to between 25% and 50%, from a previous goal of between 30% and 70%.

For one of the company’s biggest landlords, mall-owner Intu Properties Plc, the concessions are not enough for it to support the deal, according to a person familiar with its views who asked not to be named discussing information that isn’t public. An Intu representative declined to comment. An external representative for Arcadia declined to comment on today’s vote.

The cost of the change to rent cuts is expected to be about 9.5 million pounds ($12.1 million) in the first year, which will be covered by Tina Green, the tycoon’s wife who holds his stake and is the company’s only shareholder. She has agreed to inject 100 million pounds into the group to help with the turnaround plan and offered to provide affected landlords with 20% of the group’s equity if it’s sold in the future.

She will also donate another 100 million pounds as part of a broader contribution from Arcadia to protect the company’s pension plan over the next three years. That’s to avoid the fate of Green’s home-ware chain BHS which fell into administration in 2016, threatening the retirement plans of more than 20,000 former employees with a 571 million pound pension deficit.

“The way in which the increasingly beleaguered Philip Green quickly made sweeping concessions on the proposed rent cuts to the landlords resisting his Arcadia CVA shows how desperate he is to avoid the business falling into administration,” said Nick Bubb, an independent retail analyst. “We’ll see today whether it’s enough.”

Green, 67, was charged with misdemeanor assault in Arizona earlier this month after a Pilates instructor said the billionaire repeatedly touched her inappropriately. He was also identified in the U.K. Parliament in October as the British businessman alleged to have used legal agreements and payments to hide accusations of sexual misconduct. The billionaire retailer has denied both allegations.

--With assistance from Jack Sidders.

To contact the reporters on this story: Katie Linsell in London at klinsell@bloomberg.net;Ellen Milligan in London at emilligan11@bloomberg.net

To contact the editors responsible for this story: Vivianne Rodrigues at vrodrigues3@bloomberg.net, Chris Vellacott

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