JJB Sports seems to have succeeded this week in its bid to escape bankruptcy through a company voluntary arrangement (CVA), obtaining the required approval of more than 75 percent of its unsecured creditors and more than 50 percent its shareholders.
Landlords and other unsecured creditors voted Monday to approve JJB’s CVA, which included arrangements for the company to pay reduced rents on about 140 JJB stores that have been closed, ending those leases, and to make monthly rent payments instead of quarterly ones for the remaining 250 or so open stores. Because of the agreement, JJB and its subsidiary Blane Leisure will not go into administration, the British equivalent of Chapter 11 bankruptcy.
JJB’s shareholders then met yesterday. Those present or who voted by proxy, whose identity is still a mystery, passed the CVA deal with 99.94 percent of the vote. They also approved a resolution granting warrants to Lloyds Banking Group as security for a medium-term loan of £25 million (€27.8m-$36.8m). If exercised, the warrants would give Lloyds 5 percent of JJB’s equity.
Assuming that none of the shareholders challenge the CVA in court during a 28-day “challenge period” ending around May 28, JJB would be the first listed company to use such an agreement to successfully avoid bankruptcy. It will provide a short-term £25 million loan from Barclays in addition to the money from Lloyds, and the company has said these funds will safely get it through the rest of the fiscal year ending in January 2010. The company had written a clause into the CVA that the creditors’ vote would outweigh that of the shareholders.
Separately, Dave Whelan, who bought 53 of JJB’s gyms and their 52 connected shops in March, is said to be interested in buying also the company’s rights to the Slazenger brand for golf, cricket and tennis equipment, as well as a helicopter owned by JJB that is said to be worth about £1 million (€1.1m-$1.5m). JJB sold a newer helicopter early this year for £4 million. It bought the rights to Slazenger, a brand started in 1881, from Sports World International (now Sports Direct International) in 2006 for £10 million.
