In order to reduce a major overhead ( store rents) the company has with advisors put together a CVA(Creditors Voluntary Arrangement) and are presenting this to a number of landlords who will be asked to reduce rents on a number of stores to help the company continue trading.
Like many CVAs the creditors are faced with a stark choice, accept the proposal or see the business fail and be left with empty shop units and no rent until the shops are re let to new tenants.
Woolworth and Comet both had credit insurance limits cut to extent that they could not buy supplies on sensible credit terms and as a consequence the companies could not trade.
Early indications show that the Landlords will support the CVA allowing BHS to reduce a number rents going forward. As with all CVAs the future success of the company will be both to achieve profitable trading and gain the support of suppliers to grant future credit terms. I understand that a number of credit insurers reduced their limits last year. This meant that suppliers to BHS who insured the debt found that their original supplier limit had been reduced.
The two significant retail failures of recent times, Woolworth and Comet both had credit insurance limits cut to extent that they could not buy supplies on sensible credit terms and as a consequence the companies could not trade.
So the big question is will BHS be able to continue receiving supplier and credit insurance support if the CVA is successful or will both be cautious which could of course cause BHS considerable difficulties. I feel the BHS recovery will be a long haul and suppliers will have to have confidence in the management team in order to secure a successful turnaround.