LONDON — Arcadia Group has promised to challenge the property group Vornado, which wants to claw back losses linked to the closure of U.S. Topshop units in a company-wide restructuring that stretches across the Atlantic.
On Tuesday, the ailing Arcadia Group confirmed that it had received applications from 480-486 Broadway LLC & TMO 1 LLC, both of which are legal entities of Vornado, to challenge the Arcadia Group Limited and Topshop Topman restructuring plans.
In a statement, Arcadia reiterated that it has received the green light from the majority of its creditors to pursue a radical restructuring in a bid to stabilize the company and return it to profitability.
As reported in June, the group narrowly avoided bankruptcy after its creditors begrudgingly agreed to back the corporate restructuring plan put forward by the troubled retailer in late May.
Following a delay in voting and last-minute sweeteners from Arcadia, the group’s disgruntled creditors voted in favor of seven proposed CVAs, or company voluntary arrangements.
Creditors’ approval means that Arcadia is free to close stores, lay off workers, negotiate rent cuts and slash costs.
“These challenges are entirely without merit and we will vigorously defend them,” said Ian Grabiner, chief executive officer of Arcadia Group.
“The CVAs are a vital part of our restructuring, putting the business on a firm financial footing and enabling significant investment as part of our growth plans, which will ultimately benefit all our stakeholders. Our group continues to trade as normal and we remain focused on delivering our turnaround plans,” he added.
In the U.S., the Vornado landlords had argued that the CVA process amounted to an opaque restructuring process without court supervision, and claimed that it effectively excluded their interests. The Vornado landlords asked a New York bankruptcy court last month to take a closer look at how Arcadia handled proceeds from liquidating its U.S. assets, and to review its purported plan to continue with business through Nordstrom.
The landlords had also aimed at Sir Philip and Lady Tina Green’s management of Arcadia’s assets, and asked the court to allow them to seek more information about the company’s recent finances.
“The Vornado landlords are also concerned that the foreign debtor’s ultimate owners and controllers, Sir Philip and Lady Christina ‘Tina’ Green are now trying to use this chapter 15 case, together with a CVA process, to syphon value and repatriate the Foreign Debtor’s U.S. assets to the U.K. — out of the reach of U.S. creditors,” they wrote in a filing in June 5.
Attorneys for Vornado declined to comment at the time.
Earlier this month, Arcadia’s foreign representatives Daniel Francis Butters and Ian Colin Wormleighton asked the U.S. Bankruptcy court to dismiss the case, and said the landlords were simply “seeking broad license to probe the foreign representatives, foreign debtor, its affiliates and its affiliates’ reorganization in an attempt to corral assets of the foreign debtor in satisfaction of their claims while disregarding all other creditors of the foreign debtor.”
As reported, Arcadia said it has identified 23 out of its 566 U.K. and Irish trading locations for potential closure, and will ask for a reduction in rental costs and revised lease terms across 194 locations.
The stores set to close employ 520 people, and Arcadia said it would make every effort to redeploy affected colleagues within the business, where possible.
The remaining 349 locations, including the Topshop Topman flagship in Oxford Circus, will be unaffected by the proposals, Arcadia said.
In the U.S., Arcadia said it had commenced a process “that may result in the closure of all 11 Topshop/Topman stores in the U.S.”
Going forward, Arcadia said it would restructure in line with its strategy to deliver its offer through its wholesale partners and digital platform. Topshop is sold through Nordstrom in the U.S.