A CVA is typically used by insolvent companies to pay creditors money owed out of future profits. It is highly unusual for a retailer to use such a measure to shut a parcel of stores.
The CVA, which does not affect the main PowerHouse chain, must be approved by creditors because of the implications for outstanding payments. Affected creditors - understood to comprise 24 landlords - will vote on whether to accept the proposal at a specially convened meeting next Friday.
According to some industry sources, the plan has disquieted landlords. However, PowerHouse chief executive Chris Onslow said he expected the deal to go ahead and described it as a 'responsible' approach. PowerHouse is understood to be offering payment to cover six months' rent on affected shops.
Tony Murphy, director of PowerHouse's financial advisor Smith & Williamson, claimed the use of a CVA was an innovation to be welcomed. 'It is very cutting edge,' he said. 'This is what retailers should be doing to safeguard businesses, rather than let them die.
'For the past two years, PowerHouse has made losses, but this year the CVA will make it profitable pretty much instantly.'
PowerHouse revealed its intention to shut the under-performing stores last week, when Onslow reported a stronger-than-forecast Christmas at the 53 core shops.However, the 4.9 per cent seasonal like-for-like sales rise at the core chain was undermined by a 14 per cent decline at underperforming shops.
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