JJB Sports in landlords payout plan

Retailer JJB Sports has offered landlords a payout of up to £7.5 million if they accept a deal that could see 89 stores close as it battles to stave off administration.

Wigan-based JJB wants to close 43 of its 246 stores on or before April 24 2012, while a further 46 stores could be closed by April 24 2013 if their performance does not improve.

Under the terms of the deal, known as a company voluntary arrangement (CVA), the landlords of the 89 stores will also see their rent reduced by 45%.

Several landlords have expressed concern about the deal but JJB has offered them a sweetener by saying they will receive cash or shares worth between £2.5 million and £7.5 million on April 2013 depending on the performance of the company.

JJB, which employs 6,100 staff, said the deal – its second CVA in as many years – is necessary to keep it from collapse as it struggles to compete with buoyant rivals JD Sports Fashion and Sports Direct International.

It said the CVA is part of a turnaround plan that will also involve the latest in a series of cash calls from investors to allow the business “to move forward on a far sounder footing”.

At the end of last month JJB raised £31.5 million from its five biggest shareholders, including the Bill & Melinda Gates Foundation Trust, after raising £100 million from investors just over a year ago.

It plans to raise at least another £31.5 million from shareholders by the end of June and will release further details before March 22 when shareholders and creditors will vote on its plans.

JJB chairman Mike McTighe said: “JJB’s restructuring plan is on track. In formulating these CVA proposals we have talked to our landlords and listened to their views. As a result, we are offering them a possible share in the value of a restructured JJB of up to £7.5 million, payable in two years’ time.”

Richard Fleming, UK head of restructuring at KPMG and proposed supervisor of the CVA, said the deal will allow the landlords of the 89 stores to be repaid up to 29.2p of every pound they are owed, whereas they will receive just 1p if JJB goes into administration.