Landlords have accused Clarks of abusing a moratorium on commercial evictions as the shoe chain pushed through a legal deal that will cut the rent it pays on 60 stores to zero.
Creditors on Friday approved an insolvency process known as a company voluntary arrangement (CVA), which will wipe out rent arrears on more than 300 outlets as well as slash future rent bills.
No rent will be paid on 60 stores and hundreds more will switch to rents based on sales – a move that will hit landlords’ incomes during the high street lockdowns during the coronavirus pandemic.
Clarks’ vote on the CVA deal involved landlords, but their opposition was outvoted by other creditors, such as the chain’s pension fund, footwear suppliers and shopfitters.
The deal comes as retailers and other businesses continue to trade from thousands of outlets despite failing to pay rents, and thanks to a halt on evictions, which will last until the end of the year. The government brought in the measure to give businesses time to agree how to share the pain from months of difficult trade.
Melanie Leech, the chief executive of the British Property Federation, which represents hundreds of landlords, said: “Clarks is exploiting the government’s moratorium on evictions, failing to pay rents owed since March, despite being able to reopen and benefiting from significant government financial support.”
She said the deal undermined the government’s code of practice, which said tenants and property owners should work together to negotiate rental agreements and develop a joint plan for economic recovery in the face of Covid-19 and trading restrictions.
Vivienne King, the chief executive of Revo, which brings together shopping centres, local councils and other property businesses, said: “The Clarks CVA is continuing the very worst insolvency practice, with no meaningful vote for property owners on drastic measures that disproportionately affect them.
“During the pandemic Clarks has benefited from the furlough scheme and the business rates holiday and still it has been failed by its management. It is outrageous that it is landlords who are expected to face the consequences and prop the business up financially, having already received no rent since March.”
The CVA is a key step in the founding Clarks’ family’s deal to sell a majority stake in the business to the private equity firm LionRock Capital.
Gavin Maher, a partner at advisory firm Deloitte, which helped secure the CVA, said: “The CVA, together with the proposed investment from LionRock, will provide a stable platform upon which the management’s transformation strategy can be delivered.”
The company, which announced 900 job losses in May, is also expected to cut at least 700 jobs as part of a shake-up of its shop management and store estate. The company said it could not confirm the number of redundancies.