When a company announces store closures (such as hmv)

What is the logic behind closing the stores instantly?

Won't they still have to pay rent on the stores until the leases expire as the company HMV still exists?

Or does that mean they're all actually separate businesses who can individually claim bankruptcy, close the doors and walk away debt free?

 

Usually it’s cheaper to close if they’re losing money in that location. Long-term, landlords will agree to sub-let or let someone take it on for similar money. But yeah, they’re usually still bound by the lease.

 

Bound by terms of the lease unless as dub tyke says, landlord can get a tenant earlier, or, company gets agreement for a CVA, as I think largely happened at House of Fraser but then was reneged on to allow Ashley to do a prepac deal.

If you look, a lot of the current struggling retailers are giving up prime sites first, by far the most expensive retail, but the most likely to find an alternative tenant more swiftly.

 

The administrators prime aim is to cover as much as possible of the money owed to their client.

Closing the store and handing the keys back has several advantages.

Any back rent gets chucked into the unsecured creditors pot.

Any future rent will either be agreed at a discounted figure until the property is relet or not paid at all with it thrown into the unsecured creditors pot.

No business rates.

Reduced staffing costs.

No running costs eg gas lecky.

Any historic debt that pre dates admin. In unsecured pot.

And so forth.