Debenhams still hopes to reopen

RETAIL: Debenhams is on the brink of administration for the second time in a year, the company has confirmed, although it hopes to reopen once restrictions are lifted.

With 142 stores now closed and most staff on furlough, the current owners want to push the business into administration then buy it back debt-free.

DEPARTMENT STORE Debenhams is on the brink of administration for the second time in a year, the company has confirmed, although it hopes to reopen once restrictions are lifted.

With 142 stores now closed and the majority of its 22,000 staff on furlough, the current owners want to push the business into administration then buy it back debt-free.

The company explained: “This move will protect Debenhams from the threat of legal action that could have the effect of pushing the business into liquidation while its 142 UK stores remain closed in line with the Government’s current advice regarding the Covid-19 pandemic.”

Debenhams’ owners yesterday filed a notice of intent to appoint administrators from FRP Advisory to oversee the process.

The company has added that it is making preparations to open again once Government restrictions are lifted.

“The group is preparing to enter a ‘light touch’ administration that will see the existing management team remain in place under the direct control and supervision of the administrators,” it said.

“The group is making preparations to resume trading its stores once Government restrictions are lifted.”

The majority of Debenhams employees in the UK are currently being paid under the Government’s furlough scheme, after its stores closed following the shutdown of non-essential shops.

It added that it continues to trade online across the UK, Ireland and Denmark and customer orders, gift cards and returns are being accepted and processed normally.

Debenhams said it has the support of its lenders to enter administration and is engaging with employees and suppliers over the move.

The historic retailer has closed 22 shops in recent months as part of plans to shut 50 sites and bring its total estate to 110.

The announcement comes amid reports that Cath Kidston is also set to appoint administrators, while rival Laura Ashley has said it will permanently close 70 stores after sliding into administration.

Julie Palmer, partner at corporate rescue and recovery firm

Julie Palmer, partner at Begbies Traynor.

Begbies Traynor, said: “Debenhams has been in financial difficulties for a while so this doesn’t come as a major surprise. But it will leave its workforce of 20,000plus in a precarious position who will struggle to get new employment during the ongoing uncertainty.”

In February 2019, Debenhams announced a “strategic sourcing partnership” with global supply chain “solutions provider” Li & Fung.

In April 2019, Debenhams plc entered administration and delisted. The operating businesses, under Debenhams Group Holdings Ltd, were acquired by a consortium of lenders, Celine UK NewCo 1 Ltd. Debenhams gained access to £200m of new funding and had since “embarked on a restructuring plan”, its website says.

The company’s history goes back to 1778 when William Clark established a drapers store in London’s West End, which sold expensive fabrics, bonnets, gloves and parasols.

In 1813 William Debenham invested in the firm which then became Clark & Debenham.

The first store outside of the capital was opened in Cheltenham in 1818.

Debenhams currently has stores across Yorkshire including Leeds, York, Harrogate, Wakefield, Hull, Beverley, Sheffield and Doncaster.

It leaves its workforce of 20,000-plus in a precarious position.