Fashion store AllSaints and retailer Poundstretcher bag CVAs giving them a way out of debt – but ICSM Credit’s Ian Carrotte warns creditors: you’ll take a haircut

Fashion retailer AllSaints have neogotiated a CVA to stay in business

Fashion store AllSaints and retailer Poundstretcher bag CVAs giving them a way out of debt – but ICSM Credit’s Ian Carrotte warns creditors: you’ll take a haircut

CVAs (Company Voluntary Arrangements) are the go-to option for ailing companies as more firms seek a way out of insolvency and dumping debt (all with the agreement of their creditors) as two more big names opt for the nuclear option. Both retailers fashion store AllSaints and budget retailer Poundstretcher have been hit by the Covid-19 lock down although Poundstretcher were able to remain open as a grocery store and provider of essential supplies including toiletries. However Poundstretcher had serious problems before the crisis with plans to turn the firm around financially as debts mounted. With more than 75% of creditors agreeing to the CVAs it seems likely the businesses will survive – for now.

CVA is a dirty word

Hamish Burns writing for Insider this week said: “Insolvency is a dirty word for some while the CVA has had a bad reputation as a sneaky way to dodge debts and rent arrears.”

He quoted Tim Cooper of Addleshaw Goddard as saying that “when misused, the CVA is a ‘sticking plaster solution to insolvency, and not addressing the reasons for the underlying business distress’".

“They are an excellent tool, if used properly," Tim Cooper said: "Case law across the UK demonstrates the courts perceive them as a flexible process provided they are transparent.”

Failed business models

Ian Carrotte of ICSM Credit takes a more jaundiced view of CVAs. He said: “CVAs can simply put off the inevitable if the same failed business model is followed after the creditors agree to it. Look what happened to those giants of the high street – Woolworths, BHS and Mothercare – they achieved a CVA but didn’t change their marketing and were eventually liquidated.”

He said that members of the ICSM credit intelligence group had taken part as creditors during CVAs voting to accept the deal knowing full well they would lose cash – but had a chance of recouping some losses by continuing to trade with the ailing firm.

“It is unrealistic to think nobody will have to take a haircut,” he said, “CVAs by their nature write off debt – either now or over a longer period. My advice is once a CVA has been agreed and as a creditor you’ve accepted it don’t allow the firm to take extended credit terms. Trade by all means but at the first sign of a delayed payment – pull out as they’ve broken your terms of business. Once bitten twice shy as they say.”

About ICSM Credit

ICSM Credit has more than four decades of experience as a credit intelligence group whose members gain inside information about firms in trouble allowing them to avoid bad debts and rogue traders. To join costs less than a tank of fuel - while at the moment there's a special free temporary membership offer during the Covid-19 crisis which gives access to free legal letters. ICSM also has an effective debt collecting service which has a global reach - ask for details from Paul.

For details about ICSM Credit call 0844 854 1850 or visit the website or email Ian at on how to subscribe and to join the UK’s credit intelligence network to avoid bad debts and late payers. Follow ICSM Credit on FaceBook, Twitter and YouTube and Ian Carrotte on LinkedIn.

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