The Body Shop creditors face uncertainty over almost £50mn

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The Body Shop collapsed owing almost £50mn to unsecured creditors who face being left out of pocket as administrators pursue a company voluntary arrangement in an effort to keep the retailer’s remaining shops open.

The administrators at FRP Advisory said in a report that “it was not possible to estimate the level of distribution that may be made” to unsecured creditors such as suppliers and landlords, although “there will be a dividend available” if a CVA is successful.

A CVA is a type of insolvency that usually results in landlords agreeing to hefty rent cuts in exchange for keeping stores open. The Body Shop still trades from 116 outlets in the UK, having closed 82 after it went into administration in February.

To be successful, a CVA requires the approval of the majority of the company’s creditors. If approved, The Body Shop would continue to trade under the ownership of Aurelius, the private equity firm that took control of it four months ago.

“Should a CVA not be possible, we will proceed with a sale of the business and assets,” said FRP in its report.

Hundreds of unsecured creditors including consulting firms Accenture and the Boston Consulting Group were owed a total of £44.6mn, according to the administrators’ proposals finalised this week.

However, some outstanding payments to employees as well as unpaid pensions contributions are expected to be repaid in full, even if a CVA is not approved, as well as money owed to HMRC.

Aurelius indicated that they would be supportive of a CVA to rescue the business, the documents said.

The private equity firm ranks as a secured creditor in the administration after The Body Shop took out a series of loans from the private equity firm, meaning Aurelius would have a claim of several of its assets in case of a collapse.

If a CVA was approved, “in order to support the rescue of the company”, Aurelius would not pursue The Body Shop for what it owed, according to the proposals.

FRP’s assessment of the weeks leading to the retailer’s administration’s underlined the financial strain The Body Shop was under after it was bought by Aurelius from Brazilian cosmetics conglomerate Natura & Co.

They said: “It became apparent that the short-term cash position of the company was adverse to that that had been forecast, driven by poor results in the 2023 financial year and the unwinding of the company’s working capital.”

“Prior to the sale to the Aurelius, stock levels were depleted over the peak Christmas trading period. Meanwhile, trade creditor arrears increased, and a $76mn revolving credit facility was repaid. As a result, January 2024 saw a higher requirement to fund working capital plus certain exceptional costs that were not foreseen.”


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