Monsoon Accessorize has become the latest high street chain to launch a major restructuring as bosses asked landlords for a cut in rents on more than half its stores.
The company confirmed that accountancy giant Deloitte has been appointed to run a Company Voluntary Arrangement (CVA) – similar to Arcadia, which secured backing from landlords earlier this month to cut its own rents.
A CVA is a form of restructuring that companies use to avoid going bust, but there has been controversy, with landlords claiming retailers are misusing them to cut their costs.
Monsoon is calling for rent reductions on 135 sites out of 258 across the country.
It said: “The current rent and occupancy costs facing the group are now unaffordable given the fundamental changes that have taken place in the retail sector, and a significant number of stores are delivering a negative contribution as a result.
“The companies therefore need to reduce the costs of their store portfolios to ensure their ongoing viability. No store closures are currently planned within these proposals.”
Bosses also revealed that credit insurance has been removed – meaning Monsoon must pay suppliers upfront, with insurers unwilling to cover the costs of any non-payments.
As part of the CVA proposals, Monsoon and Accessorize’s owner, Peter Simon, has already provided an emergency £12 million loan – which will be repaid first if the company goes bust – and a further unsecured credit facility of £18 million at 0% interest, to enable the turnaround plan to be implemented.
The £18 million will only be available if the CVA passes.
Mr Simon has also said he would reduce rent on the company’s head office, which he owns, by 50%.
To encourage landlords to sign up to the deal, company bosses have proposed a profit share scheme, where they could received up to £10 million if the stores are profitable and beat sales targets in future years.
A meeting will take place on July 3 where landlords will vote on the proposals.
Paul Allen, chief executive of Monsoon Accessorize, said: “Trading for the group has been difficult for some time, as it has been for much of the retail industry.
“In early 2016, we implemented a plan which initially delivered positive like-for-like store sales. However, in the two years that followed, overall like-for-like sales have decreased as market conditions declined.
“The proposed CVA is designed to reduce store operating costs and to bring the costs more in line with market rents.
“Through implementing the CVA and the shareholder credit facility, the group will be able to invest in the business, the brands, and in growing profitable sales channels – both in-stores and online.”