Body Shop administrators plan CVA, retailer owed £276m before collapse

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Body Shop administrators plan CVA: the insolvency practitioners in charge of The Body Shop are considering a Company Voluntary Arrangement (CVA) as a possible solution to the company’s growing financial difficulties.

It has been reported that FRP Advisory is currently working on a CVA, which is intended to help the company negotiate with its landlords in order to obtain rent reductions for its stores. Some of the key players in the equation are Landsec, Network Rail, and Hammerson.

Before it was taken over, The Body Shop in the UK had significant debts amounting to £276 million owed to a range of creditors, including landlords, suppliers, tax authorities, and international divisions. It is worth mentioning that the Avon unit of former owner Natura &Co is the largest trade creditor, with a debt of over £13 million for manufactured products.

Successfully implementing a CVA would provide a viable solution for the company to overcome administration, enabling private equity firm Aurelius, who recently acquired the company, to maintain ownership. If an agreement on the CVA terms cannot be reached, FRP plans to move forward with the sale of the business and its assets, which includes The Body Shop brand valued at approximately £7.9 million.

CVAs have been widely used by businesses to navigate financial challenges, especially during the pandemic. They have proven effective in helping businesses manage rent obligations and stay operational. However, for The Body Shop, the consent of the company’s creditors would be crucial for the CVA to move forward.

Aurelius received backlash for putting The Body Shop into administration soon after acquiring it. The administrators’ report later revealed the company’s severe financial troubles. There were various challenges such as unexpected cash shortages, reduced stock levels during crucial trading periods, and revenue shortfalls that were worsened by extensive discounting practices.

In addition, Aurelius faced unexpected working capital requirements and exceptional costs due to the sudden repayment of a $76 million revolving credit facility before the change in ownership. The chain faced challenges with its lenders, resulting in the termination of banking facilities and imposing further financial constraints.

Essentially, Aurelius faced unexpected challenges when acquiring The Body Shop, which required a substantial amount of capital to address funding gaps and stabilize the business.

Ethan Sullivan

Ethan's penchant for the pulse of the fashion world extends to covering lifestyle topics, offering readers a seamless blend of the latest style updates and lifestyle trends.

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