Paperchase has agreed as part of the CVA (Company Voluntary Arrangement) that rents at 28 of its 145 stores will be cut by 50% for three months, after which those stores would either continue, or operate for a rent-free period yet to be disclosed. The agreement allows Paperchase to align rents more accurately with footfall.
Job losses have not been ruled out, however the retailer has indicated it will relocate as many staff as possible in the five stores set to close.
Duncan Gibson, CEO of Paperchase, said: “I am pleased to have had our proposal approved and I would like to thank our creditors for the support they have shown us.
“The alignment of store rents to footfall and trading, alongside our long-term strategy to diversify and increase revenue from UK and international partnerships, and online sales, will lay the foundations for a successful future.”
He told The Times that the company needed to reduce costs “to ensure a long-term, sustainable future for the business.”
Will Wright of KPMG and joint supervisor of the CVA added: “The engagement and buy-in of all stakeholders throughout this process has been vitally important in putting together an innovative CVA proposal which, following today’s approval, will allow Paperchase to move forward with financial and operational restructuring plans.
“Today’s vote saw a majority of all voting creditors choosing to approve the CVA, surpassing the 75% total required in order to pass the resolution.”
Paperchase is the latest high street retailer to use a CVA to curb its costs through reduced rents and store closures. In the past 18 months Prezzo, Carpetright, New Look, Mothercare and Homebase have also pursued the CVA option, unpopular with many landlords who complain at the sudden loss of rental income while other creditors of foundering businesses remain unscathed.