River Island is at risk of collapse “within weeks” unless its radical rescue plan is approved, a newspaper claimed on Thursday. And while it’s likely to face opposition, such plans do have a history of being approved as the alternative is often worse for creditors. 

The Telegraph said it has seen a proposal that includes shutting 33 stores (as had already been revealed), as well as cutting rents on 71 more and writing off debts in order to “stave off a severe liquidity crisis”.

It said the plan will go before the High Court next week and requires agreement from three-quarters of the retailer’s creditors. If it gets that, an emergency £40 million borrowing facility from its owners-founders (the billionaire Lewis family) will allow it to pay its bills.

If not, it “will effectively run out of money by the end of August”, the newspaper reported and “will not be able to continue trading as a going concern”. That would mean administration or insolvency proceedings.

River Island has blamed rising costs in recent years and the shift to online shopping, which means its “large portfolio of stores… is no longer aligned to our customers’ needs”.

The warning comes in the formal restructuring plan produced by advisers PwC, which says the business will otherwise face a £10 million “funding need” in early September. That need will add up to £50 million before the end of 2025.

It’s a tough situation for a company that’s one of the UK’s key affordable fashion retailers and that employs 6,250 people. Of those, 5,300 are in its stores and 950 at its West London HQ.

As with some previous fashion sector restructurings during the last decade, the plan is likely to be opposed by some landlords who feel they’re often made to endure the most pain when retailers run into trouble. And opposition is understandable when those owning some of those 71 stores are being asked for three-year rent cuts of at least 25% and up to 75%, or to accept no rent payments at all.

The newspaper said that affected landlords would include British Land, the Crown estate and Frasers Group, which has been moving into the property space in recent years. Local councils would also be affected as River Island seeks to leave behind business rates arrears.

A company spokesman told the newspaper: “River Island circulated its proposals for a restructuring plan to creditors on June 20. In combination with the company’s ongoing Transformation Strategy, the plan is a proactive measure to place the company on a firm footing. We have been having positive conversations with key stakeholders and are confident that we will achieve approval of the plan in the next few weeks.”