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Landlords Worldwide Approve AllSaints Retail Restructuring

·3 min read

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LONDON — AllSaints has struck a deal with landlords worldwide to keep its stores open by shifting to a new rent structure that puts less pressure on the retailer.

AllSaints said Tuesday that creditors have overwhelmingly approved its request to switch to new lease terms for All Saints Retail Ltd., in the U.K., and its subsidiary across the Atlantic, AllSaints USA Ltd.

As reported last month, AllSaints had undertaken an insolvency procedure known here as a company voluntary arrangement, or CVA, to protect its 255 stores worldwide.

The move is common in the U.K. when a troubled company tries to save its business by renegotiating deals with landlords and other creditors. Both Arcadia Group and Debenhams have relied on CVAs to rescue their respective retail chains.

Peter Wood, chief executive officer of AllSaints, said he was grateful to the company’s “teams, suppliers and other partners around the world for their overwhelming support during this process.”

He said the majority of landlords across the U.K., European Union, U.S. and Canada had voted in favor of the company’s CVA proposals. “The decision to launch the CVAs was not taken lightly, and this successful outcome will be instrumental in helping us to ensure the long-term viability of AllSaints,” Wood added.

AllSaints has received protection from creditors in the U.S. as it goes ahead with a plan to restructure its U.K.-based retail operation in the wake of the coronavirus pandemic.

In late June, a U.S. bankruptcy court green lit a Chapter 15 proceeding related to the AllSaints CVA, granting the company protection from creditors.

The deal means that AllSaints will shift to rental payments based partly on turnover, rather than entirely on pre-agreed leases pegged on open-market valuations. It also means that landlords have agreed to accept less rent, at least for now.

AllSaints did not disclose the terms of the new deals with landlords.

Traditionally, turnover rents are comprised of 80 percent open market value of the property, and 20 percent store turnover. In some cases, rental payments can be 100 percent based on turnover.

AllSaints had originally sought the CVA because it said store closures due to COVID-19 lockdown had dented sales, and that new social-distancing measures, combined with lower footfall, would damage them further.

Lockdown damage isn’t brands’ only problem: Retailers in the U.K. have long complained that rent increases have outpaced store productivity. Brands with stores in central London are hit even harder as they also have to pay onerous business taxes on top of rising rents.

Gavin Kramer, a senior associate specializing in insolvency and commercial litigation at Collyer Bristow in London, said while landlords have grumbled in the past about turnover-based rental agreements, “it could be argued that turnover rents, which will rise if the company’s position improves, are fairer to landlords than a blanket rent reduction.”

Vicky Hernandez, a partner in the real estate at Royds Withy King, described turnover rents as deals where “pain and gain” are shared between the brand and its landlords.

“The agreement announced today between AllSaints and its landlords marks a major milestone in the wider adoption of turnover rents and a true partnership between retailer and landlord,” she said.

Hernandez added that while turnover rents may look attractive, they will continue to be challenging for both landlords and retailers because of the variables involved in calculating a single store’s turnover, including online sales, click-and-collect services and gift vouchers.

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