River Island restructuring plan approved by High Court judge
The London-based company has laid out a rescue plan which will see it shut 33 stores and pay reduced rents on another 71 shops.
Landlords are being asked to cut rents for three years and potentially stop payments completely on some sites in a bid to stem losses.
Matthew Weaver KC, for River Island, told a hearing on Friday that the company 'simply has not been able to reverse' a trend of financial difficulty.
In written submissions, he cited a decline in footfall and sales due to 'the pressures of a highly competitive and changing retail environment as well as the prevailing trend away from high street retail stores to online shopping'.
He added: 'A number of geopolitical events have also resulted in continuing supply chain disruption which, together with energy, labour and other price increases, has resulted in a cost base that's too high and unsustainable at its current level.'
After a meeting on August 1, five of the 10 classes of creditors approved the rescue plan, meaning River Island had to gain approval from the High Court to move forward.
No one appeared at the court hearing on Friday to oppose the proposals.
Mr Weaver said that if the plan were not sanctioned, the 'most likely scenario' is that River Island would 'enter into an insolvency process within which there would be a sale of the stock, brand and intellectual property'.
He also said that River Island was forecast to be unable to pay its debts from late August or early September, with a projected shortfall of more than £43 million.
The company is seeking funding of £54 million to make it more financially stable.
River Island has 223 stores across the UK and Ireland although none of the Irish stores are facing closures, Mr Weaver said.
In response to recent correspondence from some creditor landlords, Mr Weaver said there 'may well be an attempt by those landlords to extract value from the plan company by taking a ransom position'.
He added: 'In essence, the transformation plan seeks to address the root causes of the difficulties facing the group and to reposition River Island for long-term success.
'It involves a combination of operational improvements, cost rationalisation and strategic investment, all of which are critical to restoring profitability, improving cash flow, and safeguarding jobs.'
Sir Alastair Norris approved the restructuring plan, with a written judgment due at a later date.
River Island employs around 5,500 people and was founded in 1948 under the Lewis and Chelsea Girl brand before being renamed in the 1980s.
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