99% of creditors greenlight JJB CVA

Administrators from KPMG have announced a ‘ground-breaking’ agreement to give
JJB breathing space from its creditors while the sports giant tries to revive
its fortunes and preserve 12,000 jobs.

Richard Fleming, UK head of Restructuring at KPMG, spearheaded efforts to get
the Company Voluntary Arrangement signed off by creditors of the troubled sports
retailer. The move was backed by 99% of voters, the firm said today.

Fleming said: ‘Today’s CVA agreement is ground-breaking and shows that an
innovative approach to tackling the problems faced by many companies in the
harsh economic climate can ensure the company continues to trade and, in this
case, protect nearly 12,000 jobs. The meeting itself was a resounding success
with 99% of creditors voting in favour.’

CVAs offer a repayment proposal to the creditors aimed at allowing the
company time to address its issues and then repay all, or some, of what is owed
within an agreed time frame while the company is ring-fenced.

However CVAs are disliked by creditors, especially landlords, because the
proposed returns are usually a fraction of what they are owed.

Landlords of unoccupied JJB sites were the only creditors asked to make ‘a
financial compromise’ a KPMG spokeswoman said.

Fleming added: ‘The CVA process can be compared to aspects of Chapter 11, the
US insolvency regime, which seeks to protect the legal entity.

Indeed the recent Budget announcement on insolvency reform shows a growing
sense that the UK system should do more to protect the legal entity of a company
by offering more pre-administration options.

Administration, which, while an essential tool in the restructuring kit,
should be viewed as the option of last resort due to the damaging effect it can
have on a company’s value.’

Philip Long, head of corporate recovery at PKF added landlords appear more
willing to compromise by allowing the CVA’s to go ahead provided the plans for
the company are put together properly.