The Times - UK (2020-12-03)

the times | Thursday December 3 2020 1GM 51

Business

Vue International has handed an
ultimatum to its British landlords
demanding that they agree to defer rent
repayments for up to three years or face
a possible company voluntary arrange-
ment.
The cinema chain has given land-
lords until next week to agree to a
repayment schedule over 24 months
from September next year. If it does not
receive backing from 90 per cent of
them, it will “explore all options”.
A landlord who contacted The Times

Give us more time or we’ll bring down curtain, Vue tells landlords

said: “They made clear that if they

couldn’t get the necessary landlord

approvals, then they would have to

explore alternatives. The clear implica-

tion is that they would resort to a CVA.”

The demand came as Vue warned in

its latest accounts that coronavirus-re-

lated restrictions and a doubtful film re-

lease slate had cast “significant doubt”

over its ability to continue trading.

According to accounts for its UK and

Ireland operations, filed at Companies

House, it has secured waivers on cer-

tain debt covenants based on maintain-

ing liquidity of at least £30 million, but

it said there was a risk that weak cinema

admissions meant that it might not be

able to achieve that.

The group, which was founded in

1999, is Britain’s third biggest cinema

operator, with 90 sites. It has a total of

228 sites in ten countries. It is con-

trolled by Omers and the Alberta In-

vestment Management Corporation,

two Canadian investment firms.

In its proposal to landlords, Vue says

that it entered the pandemic in “a

strong operational and financial posi-

tion”, achieving strong trading in the

first quarter compared with the previ-

ous year and having “a well-capitalised

balance sheet with strong liquidity”.

When all its European sites were shut

in March, it says it took decisive action

to implement “a comprehensive of

package of mitigating actions”, as well

as tapping government support. It re-

opened all its sites by the end of August.

Vue says that while the film slate is

strong for the next 24 months, there are

no big releases until April and even they

could be further delayed if Covid re-

strictions continue.

It says that “ liquidity is under signifi-

cant pressure and therefore we need

further support from our landlords

over... the next six to nine months,

when film releases are minimal.” It adds

that it is seeking a rent deferral, not a

discount, for the next six months. Full

repayment is proposed on a monthly

basis over 24 months starting from Sep-

tember next year. The document says

that its cash reserves during the latest

round of European lockdown closures

“continue to be eroded”.

Vue, which declined to comment, is

not alone in struggling. Cineworld is

also considering putting its UK busi-

ness through a CVA.

Dominic Walsh

Caffè Nero, the coffee shop group, have

pushed through controversial com-

pany voluntary arrangements to eradi-

cate some of their rent debts at the

expense of property owners.

Other landlords, including Great

Portland Estates, the London office and

retail property owner, have been dip-

ping into rent deposits. The company

said that it had accessed £6.5 million of

rent deposits since the end of March to

cover payment shortfalls.

L&G’s step to recover rent from

deposits was criticised by Rice Guys, a

food business in Bermondsey, south-

east London, which said it was “ridicu-

lous”, the Financial Times reported. The

British Retail Consortium is calling for
an extension of the moratorium until
April, “in the absence of a binding code
of practice, which ensures an equitable
approach to sharing the resulting debt
burden”. A BRC spokesman said that an
extension would “enable businesses to
trade their way out of debt over the
Christmas period”.
The British Property Federation,
said: “Rent deposits exist precisely to
cover situations where rent is not being
paid, but property owners will, where
possible, try to seek agreement with
occupiers before calling on them or,
better yet, to create a new payment plan
more than a year, after Philip Day bought it in February in a pre-pack deal together to avoid having to do this.”

Tenants’ deposits provide

cash to cover unpaid rent

Legal & General is among the landlords

that have begun dipping into rent

deposits to cover billions of pounds of

rent arrears accumulated by businesses

during the pandemic.

The FTSE 100 company, Britain’s

largest investment manager for corpo-

rate pension schemes, said that it had to

“protect the pensioners whose money

we look after”.

A spokeswoman said: “With minimal

support from government, property

owners have had to absorb significant

rental shortfalls for a large proportion

of this year, which could have knock-on

effects for millions of everyday savers

and pensioners if not managed in a

balanced way.”

The company has offered some

tenants with rental deposits the option

to draw on all or part of their deposit to

help to meet their rent debts while

managing cashflow.

The move is a sign of the mounting

tension between property owners and

occupiers over how to resolve an esti-

mated £4.5 billion of rent arrears built

up this year. The government intro-

duced a moratorium in March that

bans landlords from legal action to

recover rents from commercial tenants.

The ban has been extended until the

end of the year.

Some high street chains, including

New Look, the fashion retailer, and

Louisa Clarence-Smith Ashley’s offer was inexcusable, says property firm

A Sports Direct landlord

has criticised Mike

Ashley for refusing to

pay rent on his stores

while offering

£50 million to Sir Philip

Green’s Arcadia Group

(Louisa Clarence-Smith

writes).

Mr Ashley’s Frasers

Group, which owns

Sports Direct, the

retailer, has asked

landlords to “share the

pain” of shop closures

during the pandemic by

accepting 50 per cent

rent cuts for closed

periods. Last week, Mr

Ashley offered a loan to

Arcadia, the owner of

Topshop, as it teetered

on the edge of collapse.

The offer was rejected

and administrators were

called in on Monday.

Ben Habib, chief

executive of First

Property Group, a listed

landlord, said that the

offer from Mr Ashley to

Arcadia was

“inexcusable”. He said

that Frasers owed a

pension fund, on whose

behalf he managed

property, “hundreds of

thousands of pounds in

unpaid rent”. The

backlash was first

reported by the Daily

Telegraph.

Frasers did not

respond to a request for

comment.

BONMARCHE