In the month Oddbins fell into administration after failing to secure a Company Voluntary Agreement, a new report shows rising numbers of retailers turning to the controversial practice to stave off insolvency.
Forty-seven retailers secured CVAs last year – an increase of 15% on the mark of 41 in 2009. By contrast, the number of insolvencies in the sector was down 18% on 2009 to 1,290 last year.
“The first wave of the recession picked off the weakest retailers, though with disposable incomes being squeezed by inflation, it might still be a while before the retail sector hits the bottom,” said Anthony Cork of Wilkins Kennedy, which put together the data.
Cork predicted that the controversial practice – which sees creditors agree to receive just a fraction of what they are owed – would continue to gain in popularity.
He added: “Rents are a major overhead for retailers, which means rescue plans tend to involve rent renegotiations or the disposal of unprofitable shops.
“This means that landlords invariably take the biggest hit. The fact they are increasingly prepared to accept CVAs suggests that recent experiences have taught them that allowing a company to go into administration is an even bigger risk.”
Oddbins was plunged into administration earlier this month when HM Revenue & Customs refused a deal that would have seen it receive just 21p in the pound on debts of more than £8m.
Deloitte upbeat in hunt for Oddbins buyer (4 April 2011)
Oddbins faces administration after Customs torpedoes survival bid (1 April 2011)