Retail tycoon Green’s empire hanging on landlords’ vote

Bloomberg

Retail billionaire Philip Green finds out whether creditors will force him to give up control of the sprawling empire he built up over years around well-known brands such as Topshop.
Creditors to Green’s Arcadia Group were expected to meet in London to vote on its proposals to cut rents and close stores in order to ensure its survival after a consumer shift to online shopping has decimated the profits of traditional retailers.
For Green, the process is a sign of how far the shopping tycoon has fallen. Once the nation’s king of retail and one of Britain’s richest men with a net worth of $6.6 billion six years ago, his wealth has slumped, according to the Bloomberg Billionaires Index.
His fortune is now closer to $2 billion and more than half of his wealth is derived from dividends taken out of Arcadia.
“Whatever the outcome today, this marks a huge fall from grace of Philip Green as a retailer,” said Richard Hyman, an independent retail consultant.
“His SOS to his creditors reflects an acknowledgement that he has lost control of his empire. Lowering costs is likely to buy time rather than lead to a meaningful turnaround.”
The vote was originally scheduled for last week but postponed at the 11th hour when it became clear landlords that own buildings housing some of the 566 shops and department stores across the UK and Ireland were likely to reject the deal.
Arcadia, which owns brands including Topshop, Dorothy Perkins and Miss Selfridge, has since cut the proposed rent reductions in an attempt to woo the landlords. The retailer plans to use a series of company voluntary arrangements, the same UK procedure used recently by some of Arcadia’s peers including department-store chain Debenhams and fashion outlet New Look.
The group, employing 18,000 people globally, told creditors that it was “highly likely, either immediately or after a short time period, to enter into insolvent administration or liquidation” if the vote doesn’t pass. The company needs at least 75 percent support from creditors for its plans which involve closing 23 stores and cutting rent at 194 sites.
Arcadia’s Australian business fell into administration two years ago and it’s retreating from the US by closing all eleven of its Topshop and Topman stores there.

Rent Concessions
The company has already secured the support of pension trustees, trade creditors and “a significant number of landlords”, chief executive officer Ian Grabiner said. To win over the rest of the landlords, Arcadia revised down its request for rent reduction to between 25 percent and 50 percent, from a goal of between 30 percent and 70 percent.
For one of the company’s biggest landlords, mall-owner Intu Properties, the concessions are not enough for it to support the deal, according to a person familiar with its views who asked not to be named discussing information that isn’t public. An Intu representative declined to comment.
An external representative for Arcadia declined to comment on today’s vote.
The cost of the change to rent cuts is expected to be about $12.1 million in the first year, which will be covered by Tina Green, the tycoon’s wife who holds his stake and is the company’s only shareholder. She has agreed to inject 100 million pounds into the group to help with the turnaround plan and offered to provide affected landlords with 20 percent of the group’s equity if it’s sold in the future. She will also donate another 100 million pounds as part of a broader contribution from Arcadia to protect the company’s pension plan over the next three years.