LONDON (Reuters) – Creditors in British home improvements retailer Focus DIY backed a rescue plan on Monday that should safeguard around 4,500 jobs, as the company said trading was ahead of its expectations.
Focus, owned by U.S. private equity group Cerberus, said its creditors, mostly landlords, had approved its proposed Company Voluntary Arrangement (CVA) by over 90 percent in a vote.
A CVA is an increasingly popular insolvency process which was also used by retailer JJB Sports (JJB.L) to stay in business in April.
Focus, Britain’s third-biggest pure do-it-yourself retailer behind Kingfisher’s (KGF.L) B&Q and Home Retail’s (HOME.L) Homebase, has been hit hard by a plunge in house purchases and spending on “big ticket” items in the recession.
Under the CVA, Focus will reduce its exposure to 38 non-trading stores that have been costing the group 12 million pounds ($19.8 million) a year.
While it will remain a tenant of the stores and be responsible for rates on the properties, it will no longer be responsible for rent, service charges and insurance, which will revert to landlords.
In return the landlords, which include British Land (BLND.L), Land Securities (LAND.L) and Aviva (AV.L), will get a share of a 3.7 million pounds compensation pot, worth on average about six months rent.
“Trading is currently ahead of management expectations,” Chief Executive Bill Grimsey said in a statement.
“With this CVA now firmly behind us we can concentrate on managing our existing open stores and building on this stable platform to offer the best service to all our customers, suppliers, employees and landlords.”
Focus, which trades from around 180 stores, needed three quarters of its creditors to back the CVA, arranged by BDO Stoy Hayward.
(Reporting by Mark Potter, writing by Kate Holton, editing by Rosalba O’Brien)