Sir Philip Green has won the backing of the Pension Protection Fund (PPF) for his plan to rescue Arcadia ahead of a crucial vote on Wednesday.
The owner of Topshop has struck a £385m deal to secure its pension schemes, including a £100m contribution from Lady Cristina Green, Sir Philip’s wife and Arcadia’s largest shareholder.
The PPF said it would now “vote in support” of Arcadia’s restructure.
But the plan, which includes closing 50 stores, needs the backing of landlords.
They would have to agree to a rent cut on Arcadia’s stores, which also include Burton, Miss Selfridge, Dorothy Perkins and Wallis.
The restructuring would be done through a company voluntary arrangement (CVA), an insolvency process that allows a business to reach an agreement with its creditors to pay off all or part of its debts.
In a deal with The Pensions Regulator, trustees of Arcadia’s pension schemes will be granted security over £210m worth of assets by the company, up from a previous offer of £185m.
Lady Green will inject £100m into the schemes over three years.
And Arcadia will make £75m worth of contributions to the company’s pension schemes.
Oliver Morley, chief executive of the PPF, said: “We are pleased that the company and shareholder have agreed a funding and security package for the scheme. Based on this commitment, we will now vote in support of the Arcadia Group Limited CVA tomorrow.”
But he added: “While we are the largest creditor in this CVA, other creditors will also need to agree the terms for it to be successful.”
Arcadia’s chief executive Ian Grabiner, said: “We hope that the landlords and other creditors will follow suit and we can get the company back on a strong footing in all the markets where we trade.”
Consumer expert Kate Hardcastle said the pension deficit has been “one of the biggest pressures” on Arcadia.
“It might change a few minds absolutely,” she said. “But I’d still say the result of the CVA vote is not certain. This will alleviate a lot of concerns, however.”
Arcadia currently has more than 560 shops across the UK and Ireland, and employs 22,000 staff.
It has already shut 200 of its UK stores over the past three years amid intensifying competition from a crop of more contemporary “fast fashion” retailers ranging from High Street chains such as Zara and H&M to pure online players like Asos.
Arcadia has also faced the same problems as other bricks and mortar retailers, including rising business rates and labour costs, too many unprofitable stores and inflexible leases that make it hard to close failing shops.
By Colletta Smith, BBC consumer affairs correspondent
Philip Green’s retail empire dressed a generation.
In my teenage years almost every Saturday was spent moving from one Arcadia store to another – from crowding into Miss Selfridge photo booths for pictures with friends to fawning over the Kate Moss collection in Topshop.
But times have changed.
Today’s teenagers have grown up expecting to order clothes to their home and buy them on their phone.
Boohoo, Misguided, and PrettyLittleThing have so many cheaper items available that they’ve hooked a younger generation who expect to wear an item once, post a picture on Instagram and then buy something else for the next Friday night.
But Arcadia hasn’t held onto those in their 30s who were loyal for years.
The fact that Topshop haven’t stocked above size 18 in their stores is alienating for women with changing body shapes.
The campaign to boycott TopShop after the removal of a pop-up stand promoting a book on feminism did the company no favours. Negative publicity about Sir Philip Green has done nothing to help a business so closely associated with him personally.
For many in an age group increasingly conscious about the impact of their spending, the teenage crush on Topshop is over.
Ms Hardcastle said even if the rescue deal is passed, Arcadia will still have a lot more work to do.
“There is a lot of fat within the Arcadia group and it faces a lot of challenges. It is hard to look at the business and say that anything will be the saviour of the organisation.
“It is a pretty wobbly table and people will look at how many legs it needs to prop it up.”