Lincoln’s Paperchase safe…for now

The Lincoln branch of Paperchase appears to be safe for now after the company proposed a company voluntary agreement (CVA).

Paperchase operates 145 stores across the UK including the one on Lincoln High Street. Three stores are not included in the proposal – Jersey, Guernsey and Covent Garden.

Only five of the 145 are currently earmarked for closure. The full list has yet to be announced, but it is understood that the Lincoln branch is not one of the five set to shut.

The CVA proposal divides the company’s sites into six categories.

• 45 Category 1 sites will largely remain unchanged
• Turnover rents are being proposed at 70 sites within Category 2, 3 and 4 with a varying guaranteed minimum base rents ranging from 35% to 80%
• A total of 28 Category 5 and 6 sites will experience a 50% rent reduction for three months after which there will either be a rent-free period or a closure and exit

A strategic review of the business was undertaken by the company’s directors, including a series of consultations with key stakeholders.

It is not yet known if any additional stores will be earmarked for closure as this could be dependant on how negotiations with landlords go.

Paperchase needs to secure at least 75% creditor approval for the CVA for it to proceed. The creditors will vote on the CVA on March 22. KPMG will spend the coming weeks in talks with creditors.

The proposed supervisors of the CVA are Will Wright and David Costley-Wood from KPMG’s Restructuring practice.

Will Wright said: “Over the last fifty years, Paperchase has grown to become one of the UK’s most well-known and innovative design-led stationery retailers. However, like many other businesses in the retail sector, the company has been adversely affected by a cocktail of well-documented issues, including a reduction in footfall, increased rents and business rates, and margin pressure from sterling depreciation.

“The announcement follows a detailed strategic review of the business undertaken by the company’s directors, during which a series of consultations with key stakeholders took place at which soundings were taken on whether they would be supportive in principle of the company proposing a CVA.

“We believe that what has been put forward reflects the feedback received during this process, and specifically, gives the company the ability to rationalise its store portfolio by exiting stores that are unprofitable, secure rent reductions where stores are over-rented and implement turnover rents to reflect the highly seasonal nature of the business.

“As part of the review, the directors have also been successful in negotiating a financial restructuring with the company’s lenders, which will enable new investment to come into the business. Such additional investment and the completion of the wider restructuring is however conditional on the approval of the CVA proposal and successfully concluding the subsequent challenge period.”

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