Although consumers are starting to spend once more, some retailers are continuing to struggle to achieve targets and free themselves of debt. One such retailer is upmarket maternity, pram and babywear specialist Mamas & Papas, which has now announced it will attempt to cut its rental burden through a controversial Company Voluntary Arrangement (CVA).
Under a CVA, businesses are able to approach creditors with a proposal to reduce debts through the ability to be able to continue trading. It is believed that majority stakeholder BlueGem has set a condition for the retailer that it must reduce its rents bill and consider store closures as a means of returning to profitability – hence the need for the company to think about implementing a CVA.
BlueGem, which owns Liberty department store in London, stepped in with a £20 million investment in July. It is now up to Mamas & Papas to convince the majority of creditors, including the landlords of its 64 UK stores, that a CVA would work in the best interests of everyone at a meeting on the 10th of September.
Chairman David Scacchetti declined to comment on the proposals, but hinted that store closures will not be a condition of the approval if granted.
He said; “While our international and wholesale businesses are performing strongly, the UK retail environment is the toughest I’ve experienced in the 30 years since we founded Mamas & Papas, and it has become clear that we need to take action if we are to maintain our proud position as a brand trusted by parents across the world.
“We believe the proposals will create a platform to allow us to continue offering innovative, premium products to customers in the UK and internationally, both in stores and online.”
At this time, very little is known about the details of the CVA, but Mamas & Papas has confirmed that it will be asking 60 landlords to reduce rents on September 10th. In addition, the company is currently implementing a management restructure, which has seen the arrival of former Aurora boss Derek Lovelock as interim chief executive, and will cut up to 90 jobs at its Yorkshire headquarters.
Deloitte has been appointed to oversee the CVA and this week confirmed that any changes under the arrangement will only affect UK stores. Daniel Butters and Clare Boardman are supervising the process and believe a CVA would offer the best outcome for all involved parties.
Mr Butters says; “The proposed CVA will allow the group to revise lease terms and proceed with its wider restructuring plan.
“The proposals put forward offer the best possible solution for Mamas & Papas (Retail) Limited and all of its stakeholders in comparison to the likely alternative outcomes.”
