Pros and cons of CVAs for debtors and creditors

Shoe retailer Office may soon enter a company voluntary arrangement (CVA)

Office Holdings, owner of Office and Offspring shoe shops, is said to be the latest high-profile retailer to consider entering a company voluntary arrangement (CVA)so what’s a CVA, and why are they so popular?

In recent weeks, clothing and accessories merchant Monsoon Accessorize, and the Arcadia Group – home to brands such as Topshop and Miss Selfridge – both entered CVAs, while floor covering specialists Carpetright engaged in the procedure in 2018.

There are several reasons debtors prefer CVAs to other formal insolvency procedures such as administration. Firstly, directors lose control of their business when a company enters administration, and the procedure can be prohibitively expensive.

With a CVA, however, directors get to retain control; shed much of the company’s debts; and build up cash reserves to the proposal stage, which usually makes the business more competitive moving forward.

Usually in these circumstances, creditors are apathetic and allow themselves to be bluffed by debtors who say things like: “I’m offering to repay 30p in the pound, and if you don’t accept the terms of the CVA proposal the company will go into liquidation and you’ll probably end up receiving just 10p in the pound.”

This happens because so few creditors understand that simply by uniting as early as possible during the proposal stage they can either block the CVA or force the debtor to increase the size of their dividend.

For example, if a debtor is offering to repay 30p in the pound, a group comprising at least 26% of creditors can reject the CVA proposal and insist on the inclusion of modifications that increase the amount to 50p.

The bottom line is, a debtor who can afford to repay 30p in the pound can afford 10p more, and at a push they could probably afford to repay another 10p.

Subsequently, in most cases if a debtor refuses to give you 50p in the pound, it’s probably best to accept that your money’s gone, and deprive them of their company. After all, who has more to lose; you or them?

Posted in
the 79th group

The 79th Group Update-What You Need To Know

05/05/2025

Administrations, Court Cases, and What Loan Note Holders Must Know Now The financial collapse of companies within The 79th Group is rapidly entering a critical…

Read More

T&T Trustees Appoint Administrators to 79th Luxury Living Six

25/04/2025

Are Investor Interests Being Protected? A New Twist in The 79th Group Saga Loan note holders in 79th Luxury Living Six Ltd (LL6) were recently…

Read More
the 79th group

A Difficult Truth: The 79th Group’s Latest Statement

17/04/2025

On 10 April, The 79th Group issued a public statement in response to the ongoing investigation by the City of London Police, which can be…

Read More
the 79th group

The Cold Truth About The 79th Group, the Police, and Your Money

11/04/2025

The 79th Group Loan Notes Recovery Over the past several months, a growing number of investors have come forward, alarmed and confused by what’s happening…

Read More