Travers Smith LLP has advised cruise ship retailer, Harding Brothers Retail Limited (Harding Brothers), on a successful company voluntary arrangement (CVA), a procedure more commonly used by high street retailers. Neil Gostelow and Will Wright from KPMG LLP will oversee the implementation of the CVA, as supervisors.
Harding Brothers is one of the foremost operators of stores on cruise ships supplying a range from basic provisions to watches and fine jewellery. It operates approximately 250 boutique outlets on board some 80 cruise ships. The restrictions issued in response to the global COVID-19 pandemic resulted in the complete cessation of cruise operations around the world. To allow the business to remain operational and recommence trading on the restart of cruising, the CVA proposal provides for a rescheduling of the company's trade debts. Creditors who continue to provide ongoing support to the business will be paid up to 80% of their credit balances over a period of time, dependent upon the future turnover of the business. The CVA seeks to strike a fair balance between creditors and the company in order to allow the business to manage its cash flow when it can recommence trading.
This demonstrates that CVAs are a flexible tool. Recent practice has seen them used, principally, to address unsustainable real estate liabilities. However, CVAs should also be considered by directors where a rescheduling of debts is required, particularly where a rump of debt has built up over the lockdown period. The provisions can be tailored to the type of business and the issues it is facing. As businesses emerge from the restrictions imposed by COVID-19, directors should be mindful of their options for managing a businesses' debt. Depending on the nature of the debts, a CVA might provide a viable solution to ensure that a business has a successful future.
The Travers Smith team was led by Restructuring & Insolvency Partner Edward Smith, assisted by Senior Associate Kirsty Emery.
Travers Smith's Restructuring & Insolvency team has been involved in many recent high-profile retail and leisure CVAs, including Carpetright, Carluccio's, House of Fraser, Gaucho, Powerleague Fives, itsu, YO! Sushi and Dune of London. This latest instruction is an endorsement of the team's credentials and expertise in CVA-led restructurings.