CVAs ‘delay inevitable failure’, research suggests

Of the 23 large businesses to have launched CVAs since 2016, 13 have gone on to plummet into administration, according to research by property advisory firm Colliers International.

BHS, Toys R Us, Mothercare and Jamie’s Italian are among the biggest high street names to have collapsed after launching a CVA process.

A number of embattled retailers have resorted to CVAs as they try to reduce their rental bills and renegotiate debts with other creditors.

But David Fox, co-head of retail agency at Colliers, said: “CVAs were designed to help struggling businesses, but they do nothing to address high debt levels, which often require restructuring, refinancing or a debt write-off.

“For many brands, the CVA fails. It is clearly not a mechanism that can be guaranteed to deliver a long-term viable solution. It merely just delays the inevitable future failure and pushes out the problems for the next couple of years, creating even more polarisation in the marketplace.”

The rise in the use of CVAs, coupled with their poor success rate, has heightened tensions between retailers and landlords over the past few years.

Sir Philip Green’s Arcadia group had to put its CVA plan to a second vote after landlords rebelled against the fashion retailer’s proposals.

And Debenhams’ CVA was challenged through the courts by one of its landlords as property owners ramp up the pressure on struggling retailers.

Major landlords including Westfield, Hammerson and Intu have all blamed CVAs and store closures for rising vacancy rates across their shopping centres, which have fallen in value over the past few years.