BHS avoids collapse as landlords cut rents and back survival plan

Retailer confirms it is selling its flagship Oxford Street store for £30m as it tries to raise around £100m to fund its turnaround

BHS also confirmed it is selling its Oxford Street store for £30m as it seeks to fund its turnaround (PA)

Thousands of workers at the high street stalwart BHS breathed a huge sigh of relief as the department stores group avoided collapse when it won backing from its landlords for a survival plan.

The future of the troubled chain, which has struggled in a tough market and has a pension deficit of £571m, hung on its creditors, including landlords, who had been asked to approve an insolvency procedure that would cut store rents.

In two votes, creditors agreed to the company voluntary arrangement (CVA), which BHS said “ensured the continuation of the group… protecting thousands of UK jobs”.

BHS, which was bought for £1 from Sir Philip Green, the Topshop owner, by the little-known Retail Acquisitions a year ago, also confirmed it is selling its flagship Oxford Street store for £30m. It is trying to raise about £100m to fund its turnaround.

Under the CVA, BHS will pay rents at 77 of its most viable stores at current rates, but monthly rather than quarterly. Landlords at 47 others will accept rent reductions of between 25 and 50 per cent; while talks will be held with the remaining 40 over the next 10 months at least over their futures – during which time BHS will pay rents of 25 per cent.

“This vote is a significant milestone for the group and the renegotiated rents at BHS’s loss-making stores will drastically improve the financial viability of BHS, giving the group the necessary financial flexibility to invest in the future,” BHS said.

The British Property Federation, which represents commercial landlords, said the CVA offered “a better return for landlords than if it [BHS] had fallen into administration, as well as seeing a greater number of stores remain open”.

Under its new owners – a consortium of investors, including brokers and lawyers – the 88-year-old clothing and homewares retailer has been restructuring to counter weakness on the high street. As well as trimming costs, its chief executive, Darren Topp, has introduced about 20 food stores within its shops, overhauled its online operations and upgraded its ranges, particularly in fashion, where he wants to prove that BHS offers more than “old elasticated trousers”.

Despite admitting that trading in autumn and winter had been worse than expected, Mr Topp stood by the plan. “We have a very credible plan to return BHS to growth and profitability and a revitalised British Home Stores will emerge as we accelerate our turnaround plans,” he said.

On its pension deficit, worth £571m on a “buyout” basis, BHS said it remains in discussion with both the Pensions Protection Fund, which steps in if a pensions scheme cannot meet its obligations, and the Pensions Regulator. According to media reports Sir Philip has offered to put £80m into the pension scheme.