BHS pulled back from the brink as creditors back turnaround plan
Embattled retailer BHS has been pulled back from the brink after creditors approved controversial plans to turn the business around.
The department store chain was thrown a lifeline when creditors backed two company voluntary arrangements (CVA) designed to revive its ailing business by cutting costs and preventing widespread store closures.
The company said the immediate future of the firm was secured when 95% of creditors and landlords voted in favour of a CVA for BHS Limited, which represents 125 stores.
A second CVA for BHS Properties Limited - which oversees 23 BHS stores - was also voted through with a majority of 75%.
The announcements come after it was feared the company could plunge into administration and put more than 10,000 jobs at risk if creditors and landlords failed to back plans to shore up the business.
The firm had put forward CVA proposals which asked landlords to slash the rents by 50% or 75% on 47 stores.
It has also told landlords that it needed rents to be reduced ''substantially'' on 40 more stores, or risk seeing them close within 10 months.
But the company said it will pay the rent at the current rate on 77 of its ''most viable'' stores by making monthly rather than quarterly payments for the next three years.
BHS chief executive, Darren Topp, said the decision by the creditors and landlords to back the CVA has given the company the "opportunity to move forward".
He added: "It is a tough time for retailers across the UK with huge structural challenges faced by all, however, we have a very credible plan to return BHS to growth and profitability and a revitalised British Home Stores will emerge as we accelerate our turnaround plans."
Struggling companies try to agree a CVA with creditors in a step to revive their fortunes while paying off debts.
It comes after BHS announced at the beginning of March that it would axe 150 staff from its head office and 220 from its shops in a move to cut costs.
Meanwhile, the 88-year-old retailer still faces the challenge of protecting the finances of the thousands of savers in its pension scheme, which has a deficit of £571 million.
The creditor rights of the BHS pension fund have now been passed on to the Pension Protection Fund (PPF), an organisation that safeguards pension scheme members if their employer becomes insolvent.
The PPF said it expects the scheme to pass over to the organisation, where members will receive compensation for their lost pensions.
Malcolm Weir, head of restructuring and insolvency at PPF, said a failure to reach compromise with BHS on the pension scheme may still result in the company being declared insolvent.
It has also been reported that the Pensions Regulator is pursuing the former owner of BHS Sir Philip Green for a contribution to the company's pension deficit.
BHS was sold by the billionaire retail tycoon for £1 in March last year, as losses widened to £21 million in 2013-14, up from £19 million the year before.
It was bought by the consortium Retail Acquisitions Limited, which has been the driving force behind the plans to return BHS to profitability.
David Gill, national officer of the shopworkers' union Usdaw, said: "We hope it is the beginning of a recovery for the company and leads to greater job security for staff."