Struggling JJB tries striking deal with landlords

By This Is Money
Updated: 06:08 EDT, 3 March 2011

Ailing JJB Sports has offered landlords a pay-out of up to £7.5m if they accept a deal that could see 89 stores close as it battles to stave off administration.

Store flaw: Several landlords expressed concern about the deal

Wigan-based JJB wants to close 43 of its 246 stores on or before April 24 2012, while a further 46 stores could be closed by April 24 2013 if their performance does not improve.

Under the terms of the deal, known as a company voluntary arrangement (CVA), the landlords of the 89 stores will also see their rent reduced by 45%.

Several landlords expressed concern about the deal but JJB has offered a sweetener by saying they will receive cash or shares worth between £2.5m and £7.5m on April 2013 depending on the performance of the company.

JJB, which employs 6,100 staff, said the deal - its second CVA in as many years - is necessary to keep it from collapse as it struggles to compete with buoyant rivals JD Sports Fashion and Sports Direct International. It said the CVA is part of a turnaround plan that will also involve the latest in a series of cash calls from investors to allow the business 'to move forward on a far sounder footing'.

At the end of last month JJB raised £31.5m from its five biggest shareholders, including the Bill & Melinda Gates Foundation Trust, after raising £100m from investors just over a year ago.

It plans to raise at least another £31.5m from shareholders by the end of June and will release further details before March 22 when shareholders and creditors will vote on its plans.

JJB chairman Mike McTighe said: 'JJB's restructuring plan is on track. In formulating these CVA proposals we have talked to our landlords and listened to their views. As a result, we are offering them a possible share in the value of a restructured JJB of up to £7.5m, payable in two years' time.

'There remains much to be done but we have achieved some significant success in recent weeks, and are hugely grateful to all our key stakeholders who have shown us so much support. With their continued backing we remain confident about the future of this business.'

Richard Fleming, UK head of restructuring at KPMG and proposed supervisor of the CVA, said the deal will allow the landlords of the 89 stores to be repaid up to 29.2p of every pound they are owed, whereas they will receive just 1p if JJB goes into administration.

He said: 'While CVAs have come in for criticism, we believe they offer a more socially responsible alternative for companies in distress.

'With the ever-increasing issue of empty high street stores - as much as 20% in Yorkshire - and current UK unemployment at nearly 8%, the importance of developing insolvency tools to improve the position for all stakeholders has never been more crucial.'

Shares in JJB were up 6% following today's announcement, which included plans to move from the main market of the London Stock Exchange to the smaller AIM market.