A group of American property companies have filed a legal challenge against Sir Philip Green’s Arcadia in light of the seven company voluntary agreements (CVAs) that were agreed last week.
Arcadia has decided to push its US subsidiary into administration, as part of its ongoing restructuring. Arcadia currently operates 11 Topshop stores in the US, which include; Chicago, Miami, New York and Las Vegas.
The papers opposing the administration were filed in the US on June 4, two days before first creditors’ vote on the CVA in the UK, and were accompanied by a letter requesting that Deloitte consider adjourning that vote.
As a result of the CVA approval, the US landlords have argued that their leases “will be eviscerated without any discovery and little due process”.
Vornado owns Topshop’s two New York stores on 5th Avenue and on Soho’s Broadway. Others joining the motion include Simon Group, Caruso and Canadian real estate group Brookfield.
The landlords argued that they were “frozen out” of the CVA process, and that they are affected by it because of the interconnected nature of guarantees within Arcadia and because it may result in reduced recoveries for US creditors.
Caruso pointed out that its two Topshop leases were guaranteed by the parent company, which is part of the CVA process. It added that Arcadia USA had failed to disclose the existence of multi-debtor proceedings in its paperwork or at the hearing to consider an interim approval of the liquidation sales at the US stores.
“Caruso is concerned that the group is engaging in a scheme to exploit areas of UK insolvency law that limit due process and disclosure to creditors” said the property group.
Meanwhile Deloitte lawyers said in a letter to the presiding judge that they were “working towards a consensual resolution” of the dispute. The final hearings in the case have been postponed until July 19.
