Corporate recovery rates may benefit from the recent Game ruling, according to Verdict Retail, despite some concerns to the contrary.
The retail sector analyst explains that, far from putting troubled companies at greater risk, the ruling may encourage their landlords to work more closely with them to achieve a successful turnaround.
In the ruling, the Court of Appeal decided that a company in administration should still be liable to pay its rent – which is payable on a per-day basis by the administrators for as long as they continue to occupy and trade from the premises.
This has raised concerns from some people that administrators may be less keen to get involved in corporate recovery in some instances, as having to pay rent could increase the perceived risk; however, Verdict Retail says the opposite may actually be the case.
Matthew Walton, analyst for DIY and home, says: “With landlords continuing to receive rent, they will be more willing to work with the retailer and negotiate to ensure that it survives, as they will not be losing out.”