Aimee Gibbons

Following the woes of The Body Shop and Ted Baker chains, leisure wear specialist Superdry is now set to proceed with a restructuring plan that will significantly reduce its presence on the High Street.

The retailer, which is best known for its hoodies and has been trading for more than 20 years, recently announced its creditors have accepted its proposals amid declining sales and deepening losses.

In a statement, Superdry said: “The company is pleased to announce that there was a high level of turnout at the plan meetings and 99% by value of the plan creditors which attended the plan meetings (in person or by proxy) voted in favour of the measures proposed in the restructuring plan.”

The restructuring plan, a three-year formal procedure under the Companies Act for companies in financial difficulties, is expected to result in widespread store closures and rent reductions on 39 UK sites. Superdry currently has 216 company-owned shops as well as franchised stores.

Boss and co-founder Julian Dunkerton also hopes to delist the business from the London Stock Exchange and will lead a fundraising which is expected to raise up to £10 million.

While larger portfolio landlords are accustomed to high profile tenants chopping and changing their terms, smaller, independent operators are likely to view Superdry’s progress with dismay.

The model being pursued by Superdry is a relatively new insolvency process, introduced during the pandemic. It was successfully used for the first time by the Virgin Active Group, with the English High Court approving its proposals in May 2021.

The plan is similar to a CVA (company voluntary arrangement) in that it allows directors to remain in control and businesses to continue trading while negotiating with creditors. Among the retailers that have pursued CVAs are Carpetright, Mothercare, Homebase and Wilko. The Body Shop is also reportedly considering a CVA for its remaining stores.

However, unlike a CVA, where all creditors must agree to the process, the legal route being pursued by Superdry can effectively force creditors who oppose their proposals to accept them, as long as they benefit the whole.

These insolvency terms are known in the legal profession as a cross-class cram down – meaning the courts can approve the restructuring of a company’s debts despite opposition from a class of creditors.

Furthermore, Superdry’s restructuring plan is a very technical process which requires significant consultation with accountants and lawyers. Even if a landlord was minded to oppose such proposals, the costs involved in pursuing litigation through the courts would most likely be a deterrent.

With the alternative to a restructuring plan being insolvency, the hope will be that the business is saved. But at a time when the cost-of-living crisis continues to hit retail sales, landlords will fear that others could follow in Superdry’s footsteps. Time will tell how the retailer’s choice affects the already troubled sector.

Aimee Gibbons is a commercial real estate partner at Thorntons Solicitors