Background
Select Fashions are a high street female fashion retailer with 189 store and some 2,000 staff members. The market targeted the 18-35 age demographic.
Issue
After several years of consecutive losses, including losing £1.5 million on sales of £81 million for the year to June 2016, Quantuma’s Andrew Andronikou and Brian Burke were asked to assist in rescuing the failing business and initially proposed a Company Voluntary Arrangement (CVA).
Outcome
Due to the ongoing volatility of the market, it was apparent to us that a CVA structured over a period of years would not be appropriate. A short-term solution in order to deliver a longer-term business plan was required. As a result, we put in place a nimble and flexible CVA, based upon realigning fixed costs, including rent and rates, to the trading profile of the business. We negotiated a major reduction in the debt levels, whilst also securing commitments to sufficient ongoing financial support and maintained critical supply relationships. The terms provided a basis for the company to preserve all employee jobs and stores, making an offer to creditors that would enable the business to move forward and implement its strategies.
The structure of the deal enabled creditors to recognise that this was entirely necessary to rescue the business and to obtain their support in order for the business to deliver on its plan. Through negotiation, we were able to secure a 94% approval rating of the proposal. Acceptances were received from all classes of creditors and support obtained from relevant trade bodies.
Our proposal allowed us to vary the terms of store property leases and delivered a reduction of the existing rent roll as well as an initial respite period. Stores were split into four categories based upon operational efficiency and sales. The chain’s top 50 stores remained unaffected by the process, although, as with all stores, monthly payment terms were applied in order to assist cash flow needs. 25 landlords would receive 25 per cent rent, reducing to nil rent in 3 months; 81 would receive 70 per cent, with 50 per cent paid to a further 27 landlords.
Completed within a timeframe of less than three weeks, this approach secured the future of all stores and 2,000 staff members and provided a greater certainty on cash flow moving forward. This has also enabled the business to expand its offering from its traditional 18-25 demographic, as well as enhancing its e-commerce platform to provide an additional revenue stream.
Quotes
Cafer Mahiroglu, Managing Director at Genus UK Ltd T/A Select Fashion said; “From the minute Andrew became involved, I was extremely impressed at the speed at which he mobilised his team of experts at Quantuma, who became familiar faces at my offices as they worked day in, day out, reviewing cash flow forecasts, business plans and subsequently, the CVA proposals. Andrew, Brian and the team were firmly at our side, advising us throughout. They worked endless hours to ensure our proposals would address the issues in the business. Their attention to detail and focus made sure our creditors would favourably receive them. Andrew and Brian ensured that relationships with key stakeholders and suppliers were managed appropriately to preserve the long-term continuity required to continue to trade.
The team had significant insight in the retail sector and adopted an extremely commercial approach to our situation. Following the successful approval of our CVA proposals, we have continued to engage with them and the team in an advisory capacity as we continue our journey back to full health.
I trust Andrew, Brian and the team at Quantuma and consider our relationship to be one of long-term value to us.”
