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Clarks Seen Closing Dozens of Stores if Rescue Deal Goes Through

U.K. footwear firm Clarks has launched a company voluntary arrangement in hopes of securing approval of a capital infusion from LionRock Capital.

The rescue deal from the Hong Kong private equity firm is pegged at 100 million pounds ($128.8 million). But in the process, Clarks will have to close as many as 50 underperforming stores in the U.K. And the remaining stores would likely switch over to a rent model based on sales. New Look recently won narrow approval for such a change, per Sky News, which first noted the terms of the LionRock deal. And Frasers Group, which in August acquired 71 locations of its bankrupt athletic club rival DW Sports, is also looking to shift rents from fixed amounts to sales-based agreements.

LionRock first surfaced last month as a possible candidate for a financing deal. Clarks began exploring restructuring options in April and looked into funding opportunities for a much-needed liquidity boost after reporting a loss of over $106 million in 2019, compounded by temporary coronavirus store closures. A restructuring plan that followed called for 900 job cuts and store closures over the ensuing 18 months.

As it attempted to restructure its balance sheet, Clarks has been able to continue operations without falling into administration, the U.K. equivalent of a bankruptcy in the U.S. In moving to a company voluntary arrangement, presuming creditor approval, the footwear stalwart would be able to repay creditors provided certain conditions are met.

It wasn’t immediately clear how many stores in total would need to be closed. The company in April had about 1,400 locations across 75 countries.

Presuming creditors approve of the proposed transaction with LionRock, majority ownership of the footwear firm would move outside of the founding family’s control for the first time in 195 years. Brothers Cyrus and James Clark founded the company in 1825 under the name C. & J. Clark International Ltd., although the company is best known under its trade name Clarks. The Clark family’s holding is believed to be in the 80 to 85 percent range.