Wilko, Over and Out

Posted on Jun 19, 2023. by NTI

Wilko, the retailer, is suffering more than most from a post-pandemic switch in the way people shop. Having been released back into the wild 18 months ago shoppers have been seen standing outside their stores that sell 'a wide range of affordable home essentials and garden products' scratching their heads and saying: "Why did we ever shop here? What were we thinking?"

For a retailer this is bad news, as they need people to buy stuff from their stores, and Wilko have largely failed in that objective. It appears that you really can have too much crap in your life. Who knew? When a store  like Wilko hits this realisation wall there is only ever going to be one real casualty; landlords. The family-owned discounter is seeking rent cuts on up to 250 of its 400 shops, with some landlords set to receive no rent. Stores on high streets and in shopping centres will be hit harder than those in retail parks.

The Wilko management team have chosen the global commercial real estate service CBRE, as well as our old friends at PwC to help them navigate a CVA to work with them to achieve this objective. Earlier this year, the retailer managed to secure £40 million in emergency funding from Hilco UK. According to documents filed at Companies House, Hilco has been given security over Wilko’s intellectual property. This includes the value retailer’s logo, marketing slogans and own-label products. However, now they need to dig a little deeper to find a solution which they hope will lead to them not closing many stores - for those are the places which customers visit to buy stuff.

As we in our glorious sector know, the aim of a CVA is to help the company restructure its operations and manage its debts. It is achieved by requesting creditors to accept they won't receive all of the money owed to them ... but they should get a great deal more than they would in the nuclear alternative - a Liquidation. This is when the squealing begins, the hand-wringing starts and landlords are faced with what they consider to be impossible choices. This is because they often are just that ... impossible.

It is reported that under the terms of the potential CVA, the rent will revert to the contractual amount after three years.It is just a matter of that 'three years' between now and then. It is true that a successful CVA could help Wilko renegotiate its debts, allowing the company to reduce its financial burden and improve cash flow. This, in turn, may enable the retailer to invest in digital transformation, enhance its online presence, and adapt to evolving consumer demands. All good.

But I am a landlord and I don't like (at all) what I am hearing. 

We in the NTI newsroom must point out that the terms of a CVA are not, by some stretch, decided and that intervention may not happen. Buckle up, Wilko landlords, it's going to be a bumpy ride this summer.

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