In a meeting held on 22 March, London-headquartered Paperchase Products Limited obtained approval from 78.6% of voting creditors, worth a total value of £27.94m, in respect of the decision “that the voluntary arrangement be approved”.
This included voting by connected creditors Paperchase Worldwide Group Ltd and Paperchase Canada Retail Limited, worth a voting value of £4.22m.
Excluding the connected creditors, 75.7% of voting creditors approved the CVA. For the CVA to go ahead, at least 75% of all voting creditors were required to approve the proposals.
21.4% of all voting creditors, worth a voting value of £7.62m, voted against the CVA, including HMRC, which is owed £3.46m.
The Notice to Registrar of companies voluntary arrangement taking effect, which was uploaded to Companies House earlier this month, showed that a number of UK and overseas print, publishing and related companies are among Paperchase’s unconnected creditors, all of which voted for the CVA.
These included Anben Paper Products HK Limited, which is owed £427,550; Color – Bridge (h.k) Company Limited (Donguan), £375,472; DS Paper Products Ltd, £217,042; Windles – (Waygold), £202,282; Paperlink Ltd, £64,118; Caroline Gardner Publishing Ltd, £47,815; Cedar Press (Southern) Ltd, £45,819; and Jinyi Paper Products & Printing Co., Ltd, which is owed £41,000.
Others included 3M Uk Plc (Consumer Products), which is owed £35,840; Alchemy Coatings Ltd, £31,579; Dongguan Guang Long Paper, £25,763; Paper Rose Ltd, £24,556; Icon Art LLP, £24,361; Xeretec, £13,000; GI Solutions Group Ltd., £10,961; and Pearl Print Management, which is owed £10,000. Many other related companies were owed under £10,000.
A spokesperson for Windles Group Manufacturing told PrintWeek: “There was understandable concern when we heard that Paperchase were entering a CVA. Like most retailers on the high street, we are not surprised to learn that there is a need to reduce property rent.
“We have always had a key customer/supplier relationship with Paperchase and this is continuing post the CVA. Unlike a lot of retailers that have gone into a CVA coming out of it being pre-packed and sold, Paperchase have a business plan and appear to have secured funding to support its plan.”
Will Wright, restructuring partner at KPMG and joint supervisor of the CVA, said: “The engagement and buy-in of all stakeholders throughout this process has been vitally important in putting together an innovative CVA proposal which, following today’s approval, will allow Paperchase to move forward with a financial and operational restructuring plans.”
The CVA will reportedly see the potential closure of a small number of Paperchase stores, with rent reduced at around 100 stores. Of these, 28 will pay 50% rent for three months before Paperchase decides whether to close the shops or seek a rent-free period.
A small number of loss-making stores are expected to close as part of the CVA process, while another 70 stores will have their rent tied to the turnover of the individual stores.
Paperchase said this “would better align its costs with footfall and trading”. The company’s other 45 stores will not be affected by the process.
Paperchase chief executive Duncan Gibson told The Times: “The alignment of store rents to footfall and trading, alongside our long-term strategy to diversify and increase revenue from UK and international partnerships, and online sales, will lay the foundations for a successful future.”
Paperchase’s parent company Primary Capital had called in KPMG advisers earlier this year to explore possible options for the business, which had reportedly included store closures and a sale to a new owner.
According to Paperchase’s latest filed accounts, for the year ended 3 February 2018, the company recorded a statutory pre-tax loss of £6.3m, compared to a £613,000 profit the previous year, though its sales increased by 5.6% to £131.2m.