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Jjb To Landlords: Halve Our Rent Or We Will Close

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JJB has tried to woo landlords with a "claw-back" payment as part of its controversial plans, unveiled yesterday, to avoid collapsing into administration by closing up to 89 stores.

In its second company voluntary arrangement (CVA) – an insolvency procedure – in two years, the sportswear chain plans to close 43 stores by next April, plus a further 46 stores by April 2013 if their performance does not improve.

The troubled retailer, which has 246 shops, has also proposedpaying 50 per cent less rent on these 89 properties, as well as paying monthly rents on all its stores rather than quarterly.

Significantly, however, JJB has aided its cause with a sop that was absent from its successful CVA in 2009, when it ditched 140 stores. It plans to offer the compromised landlords an additional payment of between £2.5m and £7.5m on 24 April 2013, dependent on its market capitalisation.

The accountant KPMG, whichsupervised the previous CVA and is again leading this one, said the clause offered landlords some upside. "We have added in a so-called claw-back clause which allows the compromised landlords to share in the turnaround of the business," said Richard Fleming, the head of restructuring. "In the case of JJB, we estimate the return to compromised landlords to be within a range of 24.6p to 29.2p in the pound versus 1.1p in administration."

Any landlord that manages to find a new tenant simply has to give JJB 45 days to vacate the affected store.

However if the current performance continues by 2013 it will have another CVA.

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It is not the most appetising of choices. The proposal presented by JJB to the landlords of around 90 of its shops is pretty brutal: let us halve our rent payments over the next two years or we'll have to put the company into administration, in which case you'll get nothing.

Presented with this sort of choice, many of us would be tempted to tell JJB where to stick its company voluntary agreement (CVA). If it can't pay its rent at the agreed rate, why don't landlords get someone in who can?

More at the link.

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However if the current performance continues by 2013 it will have another CVA.

With the cap on benefits, who is going to buy their stuff? JJB is just the outsourced government social clothing agency init?

Edited to add: Just noticed Reck B beat me to it...

Edited by Tiger Woods?

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