PIPER To Venue Retail Group AB’s creditors Notification on company reorganisation On 20 November, 2019 the Stockholm District Court granted Venue Retail Group AB’s application for reorganisation and appointed the undersigned, Mr. Erik Selander, attorney at law, as administrator. 1 hereby inform you about the decision pursuant to the provisions in Chapter 2, Section 13 of the Business Reorganisation Act (Swedish: Lag om ffiretagsrekonstruktion). As stated in the decision and in accordance with the provisions in Chapter 2, Sections 10 and 16 of the Business Reorganisation Act, the creditors’ meeting will be held before the Stockholm District Court, Scheelegatan 7, in Stockholm, at 3:00 p.m. on Friday, December 6, 2019. Enciosed you will find a preliminary schedule of assets and liabilities and a preliminary reorganisation plan for the company. The plan, and any changes to the plan which may have occurred before the creditors’ meeting, will be reviewed at the creditors’ meeting. In the enclosed preliminary reorganisation plan, you will find the company’s last balance sheet, additional information about the company’s financial position, details about the reasons for the payment difficulties and information about how the business may be reorganised. Stockholm, A/1( 2/9 ERIK SELANDER Attorney at law ADVOKATFIRMA DLA PIPER SWEDEN KB [email protected] PER PRELIMINARY REORGANISATION PLAN CONCERNING VENUE RETAIL GROUP AB; CASE NUMBER Ä 15814-19 Background On 20 November, 2019 the Stockholm District Court granted Venue Retail Group AB’s (hereinafter the “Company”) application for a company reorganisation and appointed the undersigned as administrator. In accordance with Chapter 2, Section 12, Subsection 1 of the Business Reorganisation Act (Swedish: Lag om fl5retagsrekonstruktion) the administrator shall examine the debtor’s financial position and, in consultation with the debtor, prepare a plan which sets forth the manner in which the goals of the company reorganisation shall be achieved (hereinafter the “reorganisation plan”). The reorganisation plan shall be submitted to the court and the creditors. The reorganisation plan is, as indicated in the headline, only preliminary. The purpose of the reorganisation plan, in conjunction with the preliminary schedule of the debtor’s assets and liabilities (hereinafter the “Schedule”), is to provide a basis for the creditors’ assessment at the creditors meeting, which will be convened on December 6, 2019. At the meeting the creditors are afforded an opportunity to express opinions regarding whether the company reorganisation should continue. As soon as an adequate investigation has been carried out a final reorganisation plan shall be submitted to the court and the creditors. The implications of the court’s decision A company reorganisation is an alternative to bankruptcy for distressed companies, but which will in the long term have a chance to survive. A company reorganisation lasts for three months, but can be prolonged by a three-month period at a time up to one year. When an application for a company reorganisation is granted the district court also appoints an administrator. The administrator investigates the company’s financial position in order to determine as to whether the Company’s business continues wholly or in part and, if so, how this can be executed and 1 PIPER whether there exists a possibility for the debtor to reach a financial agreement with its creditors (composition). A court decision regarding a company reorganisation resuits in the suspension of payments from the decision on company reorganisation. During the reorganisation period the Company shall not, without the administrator’s consent, pay debts incurred before the application for company reorganisation or provide security for such liabilities or enter into new obligations without such consent. These debts are instead subject to the payment prohibition and the non-preferential claims are inciuded in a possible future composition. During the reorganisation period the Company’s business continues as usual, however under the administrator’s review. In the course of the reorganisation period the Company may be in need of additional deliveries from certain suppliers. Sales and deliveries are carried out on a cash basis. This means that goods and services which the Company receives from the date of the application for company reorganisation is paid by cash invoice or advance payment on account. In the event that new obligations are entered into with the administrator’s express consent, such a creditor is according to law entitled to a so-called super-priority (Swedish: superflirmånsrätt) i.e. a priority right according to Section 10, Subsection 4 of the Rights of Priority Act (Swedish: Förmånsrättslag), if the reorganisation should fail and the Company is deciared bankmpt. The undersigned administrator will not grant the entering of new obligations without a written consent from the undersigned. According to the Business Reorganisation Act the Company’s creditors may not terminate their agreements with the Company with reference to the Company’s application for company reorganisation. A set-off against advance payments received during the reorganisation period may not occur against debts that had arisen before November 20, 2019. In the course of the company reorganisation distraint or other measures under the Debt Enforcement Law (Swedish: Utsökningsbalken) may not occur. In general, a company reorganisation is also a protection from bankruptcy. The Company’s financial position The Company communicated on November 20, 2019 that its credits in Nordea were due for immediate payment on October 31, 2019, after which negotiations were held with Nordea in order to obtain an extension. Since the parties could not agree on the conditions for an 2 A PIPER extension, the only course of action available was either company reorganisation, under certain conditions, or bankruptcy. The Company and Nordea subsequently agreed that a company reorganisation with a composition and a guaranteed new share issue of SEK 40 million in combination with a standstill with regard to guarantees and share pledges constituted the preferred solution. Against this background, the Company applied for reorganisation on November 20, 2019, whereby Nordea approved that the Company’s operations shall continue as usual. The maj11 features of the Company’s financial position are presented in the Schedule, Appendix 1. The Schedule shows that the Company’s main asset is a stock valued at approximately SEK 113.5 million. The Schedule also reveals that the preferential claims amount to approximately SEK 174.7 million and that the non-preferential claims amount to SEK 99.6 million. Financial information The Company’s financial position as of August 31, 2019 is presented in the attached balance sheet, Appendix 2. Accounts payable amounted as of the court’s decision on company reorganisation to SEK 85.9 million. About the company Venue Retail Group is a Nordic group that conducts business in retail, inciuding the sale of accessories, bags and shoes in 115 stores, of which 59 stores in the parent company, and online. The business is operated in two areas through the chains Accent, Morris and RizzoINK. The operations in Morris and Rizzo are conducted in subsidiaries which are not directly covered by the Company’s reorganisation. Sales consist of a mix of its own brands and external brands such as Rizzo, Don Donna, Samsonite, Tiger, Tod’s etc. The Company’s shares are listed on the OMX Nordic Exchange Stockholm Small Cap list. During the financial year 2018/2019 the Group had 366 employees (average), of which 193 were employed by the Company. Reasons for payment difficulties As stated in the application for company reorganisation, the reasons for payment difficulties can be summarized as follows. 3 PER During the financial year 2018-2019, several major programs for actions and measures were implemented. However, the positive effects of these programs have taken longer time than expected. The investment in the online store, which in itseif shows strong sales growth, has not yet compensated for lost sales from closed stores. The Company has too many unprofitable stores that have not been ciosed quickly. Inertia in adapting to the rapid change in customer behavior. Continued business The Company intends to implement a number of measures in order to address its financial problems. In summary the purpose of the measures is to focus the business on the stores with the highest profitability, the development of measures that increase sales and the implementation of cost savings. As mentioned above, the Company operates its business in 59 stores across the country. The stores that do not meet the Company’s profitability requirements will be closed. This will result in reductions in the workforce as weil as a significant reduction in the Company’s fixed costs for rents. Furthermore, the Company intends to reduce the number of hours worked in stores. Store personnel will be further trained in sales and service with a greater focus on sales management as well as more efficient follow-up work on conversion, closing etc. Moreover, the Company intends to make changes at the head office in terms of working methods and reduction of costs. The above measures can be implemented at a relatively rapid pace, after an evaluation has been carried out. However, a careful analysis is required so that the implemented measures have the intended effect. In addition, the Company will focus on demand-driven assortment and clearer presentation in stores with different themes and concepts. The Company will also link the physical stores with the online sales in a better way than it is done today. There will also be an increased focus on its own brands with higher gross margins. 4 PER At the present there is an ongoing review of basically all of the supplier agreements. Certain agreements have been identified as burdensome and termination or renegotiations of these agreements are expected to result in significant cost savings.