Thu 06/18/2020 06:48 AM
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Relevant Document:
Chapter 15 Application (Including CVA)

The U.S. business of U.K. fashion brand All Saints has filed for chapter 15 recognition of the group’s company voluntary arrangement, or CVA, in the U.S. Bankruptcy Court for the Southern District of Texas.

The principal objective of the CVA is to restore the viability of its business model and to assist it in returning to profitability. The group and its secured lender have entered into a waiver and amendment agreement in relation to any events of default that may arise under the group’s facility agreement as a result of the CVA.

The group’s shareholder Lion Capital is attempting to purchase all of the assets of fashion designer John Varvatos and will, if successful, contribute the assets to All Saints. If the purchase is not successful, the shareholder will contribute £15 million to the group, subject to conditions.

The group’s leases have categorized as follows:
  • Category 1 Lease
Category 1 Leases are leases of stores that are economically viable or, once opened, stores that are expected to become economically viable and will not be compromised (apart from Covid-19 rent arrears, to the extent such arrears are due and payable), other than being moved to monthly rent payments (to the extent they are not already).
  • Category 2 Lease
Category 2 Leases are leases of strategically important stores that contribute significant revenue and where moving to turnover-based rent (percentage rent) of 20% is necessary to assist cash flow and make the stores viable during the pandemic, and to appropriately share risk and rewards between All Saints USA and the relevant landlords.
  • Category 3 Lease
Category 3 Leases are leases which are performing adequately but where moving to turnover-based rent of 16% is necessary to assist cash-flow and make these stores viable during the pandemic, and again to share risk and rewards between All Saints USA and landlords.
  • Category 4 Lease
Category 4 Leases are leases of U.S. stores where All Saints USA has either already exercised a break right or where the stores are significantly underperforming, and where moving to turnover-based rent of 10% is necessary to help cash flow and make the stores viable during the, and to share risk and reward.
  • Category 5 Lease
These liabilities are commercially onerous to All Saints USA’s business and the group derives no benefit from them.

Guaranteed leases will also be modified, improving recovery from 2.4% to 3% under the proposed scheme. A Category 6 Lease group includes contingent and historic liabilities that are not critical to the operation of the business.

Category 2, 3 and 4 landlords will receive the benefit of additional break rights.

A creditors’ meeting and shareholders’ meeting to approve the CVA will be held virtually on July 3.

To become effective, the CVA must be approved by 75% or more (in value) of those creditors responding. However, the CVA will not be approved if more than 50% of the total value of the unconnected creditors admitted for voting vote against it.
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