Mamas & Papas demands up to 50% rent reductions as part of CVA

The mother and baby specialist has warned that it is “very likely” it will fall into administration if the CVA is not passed, and that as a result creditors would only receive a penny in the pound, compared to 19p to 21p - at the lowest estimation - if the CVA is approved, according to documents seen by Retail Week.  

Mamas & Papas has appointed Deloitte to conduct the CVA, which will be voted on by landlords on September 10.

The retailer has divided its store estate into three different categories, reflecting the variation in viability of each shop.

It has classed 25 stores as “currently unviable”, and is demanding a 50% rent reduction from landlords of those shops.

In addition, Mamas & Papas is asking for a 25% discount on a further  10 stores, which it said are “significantly underperforming”. It is not requesting a rent reduction on any of the remaining 25 stores which the retailer said are performing “adequately”.

However, Mamas & Papas is asking to shift rental payments from quarterly to monthly across all 60 stores.

Mamas & Papas said all landlords will receive the full rents due up to the next payments date.

It will also set up a Compromised Lease Fund, of between £150,000 to £450,000, which affected landlords will share.

The retailer was founded in 1981 by David and Luisa Scacchetti. Turnover reached £143m in the year to March 31, 2013, but the UK retail arm has “underperformed” and put pressure on margins.

For the year to March 31, 2014 it recorded an EBITDA loss of £8.6m.

The CVA documents revealed that David Scacchetti secured loans of £5m and £4m last year to enable it to continue trading despite the losses, but when the group breached its banking covenants in March it sought third party investment.

Last month, private equity firm Blue Gem acquired a majority stake in the retailer. It hired former Aurora Fashions chairman Derek Lovelock as interim chief executive this month.

Mamas & Papas declined to comment.