Philip Green’s Arcadia Staves Off Collapse With Creditor Vote

(Bloomberg) -- Billionaire Philip Green kept his retail empire alive after a majority of creditors voted in favor of a rescue package involving rent cuts and store closures.

Green’s Arcadia Group Ltd., which owns well-known U.K. fashion brands including Topshop, Dorothy Perkins and Miss Selfridge, said on Wednesday that its plans were approved by the “required majority” of creditors. The proposals needed 75% support.

The company will now close dozens of stores and reduce rents at 194 sites across the U.K. and Ireland, saving the retail group from potentially collapsing into administration.

Arcadia, which employs 18,000 people globally, told creditors last month that it was “highly likely” to go into administration immediately or soon after if the vote was unsuccessful.

While the vote buys Arcadia precious time, the company may not be entirely out of danger. It will have to weather a retail crisis that’s claimed household names including department store BHS -- also owned by Green -- and electronics retailer Maplin as brands struggle to contend with a global shift to online shopping.

“The longer-term question is how Sir Philip Green plans to revitalize some brands that are beyond jaded and are being comprehensively outmaneuvered by more nimble competitors, both on the high street and online,” said Bryan Roberts, an analyst at TCC Global.

Rent Concessions

Arcadia was forced to make concessions on rent reductions after it became clear last week that landlords were likely to reject the plans. The company will close 23 shops through a series of company voluntary arrangements and has separately approached landlords to shut another 25.

There were some dissenters among Arcadia’s landlords, however. Mall-owner Intu Properties Plc voted against the plans, calling them “unfair to our full-rent-paying tenants,” according to a statement.

“While we are disappointed with the outcome of today’s vote, we will work constructively with Arcadia to achieve the best outcome for both sides,” Intu said in a statement after the vote.

Meanwhile, Hammerson Plc and British Land Co. voted in favor, according to people familiar with the vote who asked not to be named discussing information that isn’t public. A spokesman for Hammerson declined to comment while British Land didn’t immediately respond to requests for comment.

Arcadia revised down its request for rent reduction to between 25% and 50% last week, from a previous goal of between 30% and 70%. The cost of the change 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 also agreed to inject 100 million pounds into the group to help with the turnaround plan and offered to contribute another 100 million pounds toward the company’s pension plan over the next three years.

“We are extremely grateful to our creditors for supporting these proposals and to Lady Green for her continued support,” Chief Executive Officer Ian Grabiner said in the statement.

Retail King

It’s a narrow escape for Green who 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.

Arcadia has faced successive years of declining sales, while earnings before interest, taxes, depreciation and amortization plunged from 219 million pounds in its 2015-2016 year to a 2018-2019 forecast of just 30 million pounds. Its Australian business fell into administration two years ago and all eleven of its Topshop and Topman stores in the U.S. are slated to be closed.

“Even with the vote going through, it’s hard to be confident about trading prospects for Arcadia,” said Richard Hyman, an independent retail consultant. “Lower rents will give some wriggle room on margins but I see the market outlook getting materially worse before things improve.”

--With assistance from Luca Casiraghi, Jack Sidders and Eric Pfanner.

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, John Lauerman

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