Landlords are set to back Focus DIY’s company voluntary agreement (CVA) today, saving 5,000 jobs and preventing the chain from going under.
Under the CVA agreement, Focus will make two payments equivalent to six months’ rent in order to hand back 38-non trading stores to landlords. Of the 38 stores, 16 have been sub-let.
The empty stores were costing Focus £12m a year in rent. The retailer has also agreed to pay landlords' rates until the leases run out, including empty property rates, but the CVA allows it to walk away from its rent, service charge and insurance obligations on the stores.
The remaining 180 stores which are still trading will move to paying rent on a monthly basis, helping the retailer’s cash flow.
Focus’s lenders, HBOS and GMAC, will also grant a two-year extension to the company’s £50m revolving credit facility, which is due to expire at the end of this year.
Bill Grimsey, chief executive of Focus DIY, said: ‘If we weren’t in recession, Focus could be making over three times what we are today. But the flexibility of our landlords will save thousands of jobs and that’s why we owe it to them to be wholly transparent in all our dealings.
‘We could have looked to close more stores but we wanted to make this simple and fair. We have sought to do everything possible to ensure the CVA is handled fairly and this is proof positive of the property industry’s commitments to working with tenants who have a sustainable, long term business.’
Liz Peace, chief executive of the BPF, said: ‘Landlords will do everything they can to be flexible, and this is a prime example of how the industry has changed massively in recent years.’
If the CVA fails, Focus could enter into a pre-pack administration.
Rupert Clarke, chief executive of Hermes and president of the BPF, said: ‘We hear a lot about ghost towns and that’s why landlords are committed to helping their occupiers as far as they can. We all want to see a choice of fascias on our high streets, and not just one or two brands.
‘But at the same time, landlords, like other suppliers, cannot be expected to shore up failing businesses. However, Hermes, along with many other landlords, has made a commitment to offering tenants the choice of paying rent monthly to help them through tough times and it shows a true willingness to work more closely with our customers for the future.’