BHS warns of collapse in three weeks

BHS has warned creditors that they stand to lose as much as £1.3 billion if the embattled retailer cannot find a solution to its spiralling debts within three weeks.

At the BHS-proposed Company Voluntary Arrangement (CVA) filed at the High Court recently it was revealed that the distressed business has a pensions blackhole of around £571 million. This figure has risen nearly £120 million since the last valuation in 2012.

However, BHS also owes around £517 million to the commercial property landlords of its 164 stores up and down the country. The CVA document reveals that, if nothing drastic happens, the retailer will not be able to trade beyond 25 March 2016, when its rent payments are due.

The document says: “If the CVA proposal is not approved at the relevant meetings, or is otherwise not implemented, it is very likely that BHS Limited will no longer be able to trade as a going concern, which would result in the appointment of administrators.”

The document also sets out three alternatives: acceptance of the CVA, an administration period to recover some losses, or that the company would enter liquidation with unpaid debts of £1.3 billion.

Further on, the document says: “Because the treatment of landlords and other CVA creditors who are compromised by the CVA proposal is better than in the alternative… scenarios, the directors consider that the CVA proposal is fair compared to administration or liquidation.”

However, BHS has also indicated that even if the CVA is accepted, there will significant job losses.

For more information, see the guide: Buying liquidated assets an attractive option.

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