The fate of JJB Sports Plc (LSE: JJB) will be decided at meetings of its creditors and shareholders in London later this month.
The Wigan-based retailer today said it had finalised the terms of the proposed company voluntary arrangement designed to enable it to stop paying rent on closed down stores.
The deal needs the approval of 75 per cent of the landlords and the holders of more than 50 per cent of JJB’s shares.
Landlords will be asked to vote on the deal at 11am on Monday, April 27, at the Royal Horticultural Halls and Conference Centre in London. Shareholders will have their chance two days later at the same venue.
If the outcome of the two meetings differs, the decision of the creditors prevails.
Landlords of the 140 empty stores will share a payment of £10m and JJB will carry on paying business rates. Landlords of 250 stores still trading are being asked to accept monthly instead of quarterly rents from June but will not receive any other payment.
As and when the CVA comes into effect, JJB will be able to draw on a a short term £25m loan with Barclays, maturing on August 31, 2009, and a medium term £25m revolving facility with Bank of Scotland.
JJB is paying Barclays £250,000 in arrangement fees and is seeking to issue warrants enabling Bank of Scotland to subscribe for 11,287,434 new shares or 4.5 per cent of JJB. If shareholders do not approve the move, the company will have to pay the bank a £500,000 arrangement fee when the loan matures on September 30, 2010.
Sir David Jones, JJB’s executive chairman, said the deal would be better for landlords than if the group went into administration or liquidation. He added: "This announcement details the continuing steps we are taking to implement the strategy necessary to secure JJB's long term future.
“Following the initial announcement of our CVA proposal we have had a number of discussions with some of our key stakeholders, including our landlords. We are very encouraged by the initial feedback from these discussions with key stakeholders and hope their continued support will ultimately allow us to focus on realising the full potential of the group's core sports retail business.
“The board is strongly of the view that the CVA proposal is in the best interests of the group and its stakeholders as a whole."
Brian Green, Head of Restructuring at KPMG in the North West, and proposed 'supervisor' of the CVA, said:
"Over the course of the last week, we have been very busy speaking to the landlords of the stores and the initial response has been very positive. They now need time to digest the detailed proposals, but feedback to date suggests that they understand that every effort has been made to ensure that the proposal strikes a balance.
"Unlike any previous CVA proposal, there are no major changes to the terms of the open store leases aside from a temporary amendment for rent to be paid monthly over a 12 month period. Landlords of closed stores will share in a pot of £10 million which, on average, should provide a return in excess of six months' rent."