Taxpayers will be forced to pay millions of pounds to sacked staff at The Body Shop as administrators oversee a drastic restructuring of the collapsed chain.
Well, OK, that’s what the law is. But what’s the real thing they’re trying to shed here?
It’s not, not really, the debt load. Because:
The Body Shop’s administration will increase scrutiny on Aurelius, which bought the retailer from Natura for £207m just three months earlier.
Aurelius emerged as the retailer’s top creditor before its insolvency and is understood to be in pole position to reclaim The Body Shop’s assets, shorn of debt, if no bidder materialises.
Well, yes, but it’s shorn of debt to itself – that’s what being the leading creditor means.
Yes, some of it will be owed to other people but unless Aurelius are preferred creditors they have to lose the same %ge as the other creditors. So, not really and not quite “shed the debt” perhaps.
As well as putting the future of hundreds of jobs at risk, the collapse has also left a swathe of the chain’s landlords bracing for closures.
He said: “The business will be significantly leaner and more profitable as debts are shed, stores are closed and property costs are renegotiated downwards.”
British commercial leases. Typical – only typical – 21 year terms, 3 year rent reviews, upwards only rent reviews. The only way out is administration (there’s a halfway stage which I can’t recall the name of but that requires the landlords to play nice). And commercial, retail, property prices have dropped, massively, these past couple of years.
At which point it might indeed be worthwhile taking the hit on that directly owned debt, plus that £20 million of equity they put in (which is, obviously, gone) in order to get back a business which has its retail rents cut by what, 50%? 70%? Could be that much.
The process slices out great gobbong chunks of their costs base. Huzzah!
Now, whether that was the original plan, or this is second best cobbled together since seeing the books in detail, who knows?
This would also be too strong a statement but I’ll make it anyway for there’s definitely a truth here. Which is that Body Shop going bust in Britain is really caused by upwards only rent reviews. Going bust is the only way out of them.