Focus DIY will outline details today of a vital restructuring deal to secure its future and urge landlords to back its proposals in a vote later this month.
Focus wants to enter a company voluntary agreement (CVA) with landlords, under which it will dump cash-draining closed stores. Landlords of its closed stores would receive two lump-sum dividends in return for losing rent.
The company is likely to fall into administration unless it receives the backing of 75 per cent of its creditors for the CVA. If landlords “” the creditors most likely to oppose the CVA “” reject the deal and Focus falls into administration, the company would probably re-emerge under its present management through a pre-pack deal. That would leave the landlords of closed stores empty-handed, Bill Grimsey, Focus chief executive, said.
The 38 closed stores “” 18 of which are sub-let “” represent a cash outflow of £12 million a year, £8.6 million of which Focus could save through the CVA.
HBOS and GMAC, its lenders, will not renew its £50 million credit facility unless the burden of the “dark stores” is removed. Mr Grimsey said: “The CVA is absolutely essential. The key to this is revolving credit facilities, which run out at the end of this year.”
Mr Grimsey is optimistic that landlords will back the proposal at a vote on August 24. “It’s a rock and a hard place for them, but it’s also a rock and a hard place for us and our 5,500 staff. The pre-pack vehicle is over-used “” it’s not a simple exercise but we have it as a contingency plan,” he said.
As part of the proposed CVA, Focus will ask the remaining landlords to accept monthly payments for the next 18 months, after which it will revert to a quarterly arrangement.
Focus is owned by Cerberus, the US private equity group that bought it for £1 in 2007. Focus said that it was trading ahead of expectations