Not such a fairy tale ending for Miss Sixty

Fashionista followers will know that regardless of how beautiful she finds a pair of Jimmy Choos, Fashionista is all too aware that it's unwise to skip paying the rent to pay for that classic kitten heel as the landlord always has the final word.

This point will no doubt be ringing in the ears of the Miss Sixty and Energie fashion chain owners. Indeed the landlord Mourant, which owns the 135,300 sq ft Metquarter shopping centre in Liverpool where Miss Sixty occupied a 3,300 sq ft unit and Energie had a 3,089 sq ft store, of which both were on 10-year leases and guaranteed by Sixty UK's Italian parent company, Sixty SPA, has successfully challenged the Company Voluntary Arrangement (CVA) entered into by the retail owners. Mourant has claimed that the retail group and its Italian parent adopted a "cynical approach" to the CVA. During his submissions, counsel for Mourant said that Sixty SPA and Sixty UK were "perfectly aware" that the CVA would not work but proceeded with it because they knew that it would take the landlord around 18 months to challenge the CVA, and would take even longer in Italy.

However, lawyers for Vantis plc accountants attempted to put forward some revisions to the CVA which were refused by the High Court. Vantis argued that the claim by Mourant that the CVA "unfairly prejudices" its interests as a creditor of the UK retail group and that there were "material irregularities" in relation to the creditors' meeting would no longer be an issue if the CVA was amended. The judge refused the adjournment application and ruled that he had seen no evidence of the proposed amendments and was being asked to "to proceed on a wholly speculative and uncertain footing". Further, the judge ruled, the application was made at the "59th minute of the eleventh hour" which was far too late for there to be any prospect of the court agreeing to it.

This demonstrates once again that for retailers, getting landlords (usually the most significant unsecured creditor) on side can either make or break a CVA proposal. By way of a brief re-cap, a CVA is an agreement between a debtor and its creditors which, once it has been agreed by the requisite majorities of unsecured creditors (75% in value of those present and voting) and shareholders (a simple majority in value), becomes binding on all unsecured creditors who were entitled to vote at the creditors' meeting to approve it – even if those creditors voted against the proposal, or did not attend the meeting.

Under the CVA proposed by Sixty UK, the landlord did not have the benefit of a guarantor. Had the company gone into liquidation, the guarantor's obligations under the lease would have continued but under the CVA Sixty SPA can simply walk away.

So when Mourant's counsel roared "Fee Fi Fo Fum! I smell the blood of an unfairly prejudicial company voluntary agreement," during his submissions to the judge this week, the owners of Miss Sixty and Energie may have found themselves quaking in their kitten heels…

Creditors dig their heels in on Stylo CVA plans

Fashionista, like most women on the planet, loves her shoes and has been admirably trying to make up for the drop in consumer spending by flexing her plastic. However, one women's efforts are insufficient to stop falling sales, particularly as regards the footwear sector, which has been hard hit over the past year or so.

Stylo, the footwear group which owns Barratts and Priceless, looks to be the most recent footwear victim as it failed to secure enough support for its Company Voluntary Arrangement ("CVA") recently and fell into administration, like so many of its footwear competitors. So what then Fashionista asks is a CVA and why might a creditor (for example, a landlord) not be in favour of such an arrangement?

For those who don't know, a CVA is a court administered agreement between a company, its creditors and its members entered into with a view to avoiding a complete corporate failure. CVAs can take a number of forms but they essentially look to compromise creditors' claims in return for a reduced payment pro rata to those creditors' claims and/or payment over time, the end result being the survival of the restructured company.

A CVA can be undertaken either by the company itself, acting by its directors, or by an administrator (or liquidator as the case may be) when the company is already in an insolvency process. The moratorium given by the administration allows time and protection from creditor interference for the administrator to draft a proposal for a CVA. Alternatively, the directors of the company may propose a CVA without first putting the company into administration or liquidation. The CVA needs to be approved by ordinary resolution at a members meeting and by a majority in excess of three-quarters in value of the creditors voting at a creditors meeting, which unfortunately Stylo wasn't able to secure.

In considering CVAs, landlords are often asked to take a significant haircut on their outstanding rental payments and indeed to reduce rental payments going forward or provide rent-free periods as part of the suggested proposals. This is often coupled with waivers of guarantor liabilities from other group companies, a precedent which (particualrly for landlords with large portfolios of properties) many are not prepared to accept. In addition, landlords and other creditors may find it an unattractive proposition to allow the existing management retain control of the business going forward - if they have failed once, the view often taken is that they are likely to fail again.

Recent reports in Drapers suggest that Stylo chairman and chief executive Michael Ziff and family have bought the Stylo, Barratts and Priceless names from administrators Deloitte as well as 160 stores, the internet business and Stylo’s 165 concessions within Dorothy Perkins which is good news for Stylo and good news for Fashionista and other shoe lovers.