August 31, 2018 / 1:39 PM / 7 months ago

UPDATE 1-Britain's Homebase gets creditor backing to shut 42 stores

(Adds details, context)

Aug 31 (Reuters) - Homebase creditors have approved a proposal to close 42 stores, putting 1,500 jobs at risk but giving the British home improvement retailer a lifeline from the brink of collapse, the company said on Friday.

The proposed closures are further evidence of the deteriorating outlook for British retail sector. They are part of a so-called Company Voluntary Arrangement (CVA) restructuring, allowing the business to avoid insolvency or administration.

Homebase said the restructuring plan, proposed this month, was approved by 95.92 percent of the company’s creditors.

“We now have the platform to turn the business around and return to profitability,” Chief Executive Damian McGloughlin said.

A string of British store groups have either gone out of business or announced plans to close shops this year, as they struggle with subdued consumer spending, rising labour costs, higher business property taxes and growing online competition.

CVAs have been adopted by several British retailers including fashion chain New Look, floor coverings group Carpetright and mother-and-baby goods firm Mothercare .

Homebase was purchased by Australia’s Wesfarmers for 340 million pounds ($440.95 million) in 2016, but it proved a disastrous investment and was sold for a mere 1 pound to Hilco Capital in May.

$1 = 0.7711 pounds Reporting by Justin George Varghese in Bengaluru Editing by David Goodman and Edmund Blair

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