UK footwear chain Hotter Shoes has reportedly gone ahead with plans to file a company voluntary arrangement (CVA) proposal to creditors and shareholders seeking approval to close 46 stores as it deals with the impact of the coronavirus pandemic. The plan would leave the company, owned by Electra Private Equity, with 15 stores in a move designed to turn Hotter into a smaller and more resilient business.
Electra previously had announced that Hotter intended to restructure via a CVA that would leave it with 15 stores and could lead to a number of redundancies. A CVA enables an insolvent company to seek an agreement with its creditors. But, the arrangement has to be approved by creditors holding at least 75 percent of the value of the debt.
Electra added that during the UK lockdown Hotter has continued to trade strongly online, “generating the cash necessary to ensure short-term survival”.
Hotter believes that the CVA is necessary “to avoid the likelihood of Hotter going into administration”, the British equivalent of an insolvency procedure, as a result of tougher retail conditions caused by the Covid-19 pandemic, Drapers reported, citing the firm’s chief executive Ian Watson.
The proposal, if approved, will also result in the change of terms of rental payments on the chain’s remaining stores. Creditors are expected to vote on the proposal by July 28 and a virtual shareholders meeting will be held on July 29. If approved, the expected completion date of the CVA is March 1, 2021.
“The proposed CVA will enable us to continue with our strategy and will prevent further store closures and job losses in the long term,” Watson said in the interview. Electra pointed out that before the pandemic, Hotter was making good progress to accelerate the implementation of a digitisation strategy and the strategy has to be intensified following the lockdown introduced in the U.K. to fight the virus.
In a statement on its website, Electra said that Covid-19 disruption presents Hotter “with many challenges” including the availability of raw materials, primarily from India, for autumn/winter production. However, it warned that the biggest continuing threats are costs and working capital needs of operating its retail estate with uncertain returns after cash reserves were eroded during the lockdown.