Blacks Leisure, the troubled outdoor specialist retailer, will seek to reassure investors today, 24 hours before an urgent bank deadline expires.

The company’s attempts to restructure its store portfolio, at the behest of Lloyds Banking Group, its lender, have faced fierce opposition from landlords.

Blacks, which trades as Millets and Blacks Outdoor, wants to jettison 89 closed stores through a company voluntary arrangement (CVA), under which landlords agree to make financial concessions to ensure the surival of a tenant company.

The CVA was a condition set by Lloyds last month when it imposed an October 30 deadline for Blacks to present convincing restructuring plans. However, the retailer has been unable to find a compromise acceptable to landlords and has not yet presented them with a formal proposal.

Blacks is expected to announce a temporary rollover of the deadline today. It has until the end of November to get out of loss-making stores, but must convince Lloyds that it has come up with a viable turnaround plan by tomorrow.

Blacks hit difficulties last month when it emerged that it was about to breach its banking covenants — only a month after it had secured a new 12-month facility from Lloyds. The company, based in Northampton, blamed a sudden and unexpected deterioration in trading conditions.

It immediately placed Sandcity, a small loss-making subsidiary, into administration and closed a further 89 stores. O’Neill, the surfwear brand, yesterday bought four stores from KPMG, the administrator to Sandcity.

The 89 stores that have already been closed include about 50 from Blacks’ loss-making boardwear division, which mainly trades under the O’Neill fascia.

Blacks Leisure’s difficulties in drafting an acceptable CVA proposal come amid increasing unease in the property industry that the CVA process is being abused by struggling retailers to walk away from lossmaking stores.

Martyn Chase, DTZ’s head of retail, described CVAs last month as “an absolute disaster for the industry ... It’s a blatant abuse.”

Landlords have also been angered by the growing use of pre-pack administrations, in which a buyer of a loss-making business — often connected to its previous management — is lined up before it is put into administration.

This year landlords rejected a CVA proposal by Stylo, the owner of Priceless and Barratts Shoes, amid concern that it would set a precedent to other retailers.

CVAs have also caused resentment among retailers. Lord Harris of Peckham, chairman of Carpetright, said yesterday he believed that the insolvency process meant that strong tenants were subsidising weak rivals.

Kingfisher, B&Q’s owner, wrote to its landlords after a CVA by Focus DIY asking for the same monthly terms as its smaller rival.

• KPMG is understood to be trying to find a buyer for First Quench, the owner of Threshers off-licences. The company, which also owns the Wine Rack, The Local and Habbo, has 1,300 outlets and may go into administration. KPMG declined to comment.

• Company voluntary arrangements (CVAs) are painful for landlords, who are expected to cut rents to help a company to survive (Helen Power writes). The carrot for slashing rents is that, without a deal, the tenant may go bust, leaving the landlord with nothing. In short, some rent is better than none.

However, for institutional landlords of a listed company, the process is even more painful. When the likelihood of a CVA increased for JJB Sports, the sports retailer, its share price soared. A CVA for Blacks, the outdoor-wear retailer, looks increasingly unlikely, but even the possibility has helped its shares to double from a year-low of 14p.

However, the pension funds and other institutional investors that owned the freeholds of JJB’s shops have complained that all the benefit of the rent cuts that they offered went straight to the retailer’s shareholders as the markets priced-in a CVA.

Meanwhile, the institutional investors, whose equity operations did not hold JJB shares as a natural hedge, were taking the pain alone. Or rather, given that the institutions are also quoted on the stock market, they were sharing the pain with their own shareholders.

Most in the restructuring world agree that CVAs can save viable companies, particularly in the pubs and retailing sectors. So it would be a pity if landlords were deterred from such deals because they think that speculators are getting rich on rising share prices at their expense.

The answer, one head of a restructuring unit suggested, is for institutional landlords to speculate themselves, buying shares in their tenants to ensure that they get the benefit of any upside on the stock.

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