Creditors of the British shoemaker and retailer Clarks have approved a deal that will see control of the company pass to a private equity firm amid criticism from landlords over the scale of rent write-offs.
Under the proposal, known as a company voluntary arrangement (CVA), rent arrears on 320 outlets will be forgiven, no rent will be paid on 60 stores and the remainder will switch to payments based on turnover.
It also means the Clark family, which has run the iconic brand for 195 years, will cede a majority stake to Hong Kong private equity firm, LionRock Capital, in return for a £100 million (€112m-$132m) cash injection to save the struggling company, which has been weighed down by a combination of declining sales and the Covid-19 pandemic lockdowns.
Landlords are furious at the loss of income and accused Clarks’ management of abusing the CVA process, claiming they bore more financial risk than other creditors but only had a 25 percent share of the vote on the proposal. Their opposition was outweighed by other creditors, such as Clarks’ pension fund, suppliers and shopfitters.
Melanie Leech, chief executive of the British Property Federation, which represents hundreds of landlords, said that “Clarks is exploiting the government’s moratorium on evictions, failing to pay rents owed since March, despite being able to reopen and benefiting from significant government financial support.”
Another business lobby group, Revo, hit out at Clarks for taking advantage of government relief packages, while landlords had received no payments since March when the first lockdown was imposed.
Revo’s chief executive, Vivienne King, said the CVA “is continuing the very worst insolvency practice, with no meaningful vote for property owners on drastic measures that disproportionately affect them,” the newswpaper The Guardian reported.
“During the pandemic Clarks has benefited from the furlough scheme and the business-rates holiday and still it has been failed by its management. It is outrageous that it is landlords who are expected to face the consequences and prop the business up financially, having already received no rent since March.”
Gavin Maher, of Deloitte, which advised Clarks on the deal, said that “the CVA, together with the proposed investment from LionRock, will provide a stable platform upon which the management’s transformation strategy can be delivered.”
The company, which had already announced 900 job losses in May, is also expected to cut at least 700 jobs as part of a revamp of its management and store estate. Clarks had previously insisted that no jobs would be lost, while also pledging that staff and suppliers would still be paid.