Will a Sea VA be enough to keep Harding afloat?

One of the reasons why a Company Voluntary Arrangement (CVA) is such a useful device for companies to financially recuperate and restructure their finances is because it is so versatile.


Will a Sea VA be enough to keep Harding afloat this year?

Cruise ship

 

 

It’s not a “one size fits all” agreement that is written on stone tables – its entrepreneurial nature means it can be flexibly focused on the unique situation each business finds itself in and can be tweaked to give a company and its creditors confidence in the arrangement. 

 

 

A great example is how Harding Retail have turned to a CVA as their business has literally become becalmed. 

 

 

There’s lots of pontification and predictions about what is going to happen to businesses that have lots of physical stores in UK high streets. What happens to these operators if they can’t trade and what happens to their landlords if they can’t pay their rent. 

 

 

Harding Retail are in a somewhat unique position as their concessions tend to float about – literally. 

 

 

They operate 250 boutiques on board over 80 cruise liners that can be anywhere around the globe at any time. 

 

 

Due to the US government initiating a no-sail order from March 2020 and others following suit, the company has had no revenue coming in for over ten months, which has seriously impacted their business and bottom line. 

 

 

Often in a retail CVA proposal, landlords will be asked to agree to some store closures or lower rents. In Harding’s case, they proposed that creditors accept reduced amounts in settlement of outstanding unpaid invoices. 

 

 

This would see an upfront payment alongside a mechanism for creditors to recover up to 80% of their arrears depending on future financial performance and ships being allowed to set sail again sometime in 2021. 

 

 

This arrangement could become more widespread throughout the leisure industry specifically as many will have run up arrears in respect of inventory that might be unsellable after months of enforced closure. 

 

 

Most of Harding’s stock involves expensive fashion items such as watches and jewellery as well as perfume and alcohol which tend to be owned by large global businesses.  

 

 

Unlike a high-street business for instance, Harding’s won’t have stakeholders like landlords, local authorities or HMRC to deal with. Staff costs are also lower as most are employed on short-term contracts as is common throughout the cruising industry. 

 

 

The cruise lines themselves traditionally take a percentage of sales from the onboard concessions rather than charge a fixed rent and understand the seasonal nature of the business. 

 

 

Harding, formed in 1930, was bought by a US hedge fund in October which also bought out the Oak Furnitureland from administration last year so they are experienced in helping to revive distressed companies. 

 

 

The hope for Harding will be that as their typically older customer base are the first group to receive their Covid-19 vaccinations the sector will be one of the first to rebound even with reduced capacity and sailings planned. 

 

 

Chris Horner, Insolvency Director with Business Rescue Expert, thinks that CVAs are the most logical and accessible solution for many businesses that will have to grapple with the logistics of restarting activity while repaying debts that were due at the beginning of the crisis. 

 

 

He said: “So many businesses have been unable to trade at all since March 2020, and even those that have faced unique challenges, changes and behaviours that might ultimately become permanent. 

 

 

“Taking into account losses incurred during lockdown, the costs and scale of restarting operations and servicing their existing debts, many totally viable and otherwise profitable businesses will have to go through a restructuring process which needs the buy-in and support of their wider stakeholders. 

 

 

A CVA will be the ideal vehicle for many of them to take a breath, set out their plans for this year and next, and get creditors agreement for what is going to be an ongoing recovery period.”

 

You don’t need to be an experienced cruiser to know that disruptive weather can pop up suddenly and disrupt even the most previously serene sailing conditions. 

 

Even when lockdown begins to be lifted, we will likely be in for a longer period of gradual recovery rather than a huge bang followed by pre-Covid trading normality being restored immediately. 

 

Get in touch with us if you’re worried about finding shelter in the ongoing financial storm or are unsure how you can begin to raise sail again when we get the go ahead.

 

 

Our experienced crew have been through these troubled waters many times around and can guide you past the obvious obstacles as well as the sharper rocks hidden under the waterline that you only seem to see when it’s too late. 

 

Whether the best solution for your business would be a CVA, administration or even a solvent liquidation – let’s have this conversation soon.

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