Poundstretcher landlords crammed down

Poundstretcher Limited has secured High Court approval for a restructuring plan that will cut rents across parts of its UK store estate and allow the Fortress-backed discount retailer to continue trading.

Mr Justice Hildyard sanctioned the Part 26A plan on June 12, despite opposition from six creditor classes, all involving landlords. The court found that dissenting creditors would be no worse off than in the likely alternative, an administration of Poundstretcher and its parent company, Poundstretcher Leicester Limited.

The plan is designed to address the retailer’s loss-making lease portfolio after falling turnover, rising operating costs and persistent inflationary pressure left the business facing a liquidity crisis. Poundstretcher operates around 300 stores and employs approximately 3,000 people across its store network, distribution centre and head office.

The plan divides the company’s leases by profitability and strategic importance. Some stores are largely unaffected, while others face rent reductions of 25%, 50%, 75% or, for certain Class C leases, a reduction to nil. Affected landlords receive termination rights, allowing them to take back premises rather than accept the revised terms.

The restructuring also compromises business rates arrears, general unsecured liabilities and approximately £8.9 million of intercompany debt. Fortress-linked entities will extend a zero-interest shareholder loan facility to June 2029 and make further funding available under that facility. Poundstretcher’s asset-backed lending facility with Wells Fargo will also be amended, including through increased borrowing availability and waivers of existing defaults.

The company had previously used a CVA in 2020, but the relief proved temporary. By early 2026, Poundstretcher was deferring creditor payments, relying on a time-to-pay arrangement with HMRC and seeking further support from Fortress to avoid administration.

Eight creditor classes approved the plan, including the ABL lender, shareholder lender, intercompany lender, Class A landlords, Class C landlords, general creditors and business rates creditors. Six landlord classes voted against it, requiring the company to rely on the court’s cross-class cramdown jurisdiction under section 901G of the Companies Act 2006.

FRP’s analysis showed that compromised creditors would receive higher returns under the plan than in administration. Class B1 landlords, for example, were estimated to recover 31.47 pence in the pound under the plan, compared with 3.04 pence in administration. Class C landlords were estimated to recover 7.50 pence in the pound, compared with 1.78 pence in administration.

Two opposing landlords challenged the release of guarantees granted by Poundstretcher Leicester. They argued that the plan should preserve those guarantee claims and release only any recourse claims back against Poundstretcher. Justice Hildyard rejected the argument, finding that leaving the guarantees intact could undermine the restructuring because Poundstretcher Leicester formed part of the group’s capital structure and held the lease for the distribution centre and head office.

Although the court approved the plan, Justice Hildyard expressed reservations. He said landlord cramdown plans require “sceptical and especially detailed review” and noted that Poundstretcher’s turnaround strategy lacked the level of detail he would expect, particularly given the failure of the earlier CVA.

The judge was ultimately satisfied that the plan was fair, that the allocation of restructuring benefits was justified and that the retailer had a realistic prospect of achieving its objectives. He also accepted evidence that the plan would likely be effective in Scotland and Northern Ireland.

Keystone Law acted for Poundstretcher, with Tom Smith KC, Henry Phillips and Annabelle Wang, all of South Square, appearing for the company. Teneo acted as financial adviser and information agent. FRP provided financial reports, while CBRE advised on the leasehold estate.