Debenhams eyes 20 store closures amid CVA rumours

By guest author Elias Jahshan from Retail Gazette

  • Debenhams could accelerate store closure scheme amid potential CVA
  • 20 stores may be cut from estate this year
  • Embattled retailer also reportedly secured fresh cash injection from hedge fund investors

Debenhams is reportedly stepping up its store closure scheme amid talks with landlords and banks and increasing speculation of a CVA in the near future.

According to The Sunday Times, the embattled department store retailer has instructed property agents to determine the rent it should pay on its stores ahead of a rent deadline on March 25.

The newspaper added that Debenhams could launch a CVA proposal before the rent deadline, which could include plans to shut down 20 stores this year depending on the rent reductions it manages to achieve across its 166-strong store estate.

The potential CVA also depended on conditions imposed on Debenhams by its lenders, according to The Times.

The department store had already announced in October that 50 stores were set to close in the next three to five years, but this could be accelerated should a CVA go ahead.

On the other hand, a report in the The Sunday Telegraph indicated that Debenhams has secured a lifeline loan from lenders and that it may pursue a debt-for-equity swap.

The retailer reportedly held talks with various Wall Street hedge fund investors to obtain a fresh cash injection so as to provide it some breathing space from its financial commitments.

Sources speaking to The Telegraph also said a debt-for-equity swap was an option, a deal that New Look pursued earlier this month, which effectively saw the fashion chain handover majority ownership to bondholders as part of a refinancing agreement.

Sports Direct founder and majority owner Mike Ashley, who has a near-30 per cent stake in Debenhams, is reportedly in talks with the department store’s interim chairman Terry Duddy about being involved in the refinancing.

However, Ashley disagrees with some of the terms, according to The Telegraph.

The Retail Gazette has contacted Debenhams for comment regarding the potential CVA and refinancing deal.

The new year has so far been a turbulent one for the 206-year-old retailer.

It was slugged with yet another credit rating downgrade from Moody’s following the retailer’s “weak operational performance” over the crucial Christmas trading period, while chief executive Sergio Bucher and chairman Sir Ian Cheshire were both ousted from the board – thanks to a shareholder coup led by Ashley during Debenhams’ AGM.

Cheshire subsequently resigned, allowing for Duddy to step in on an interim basis, but the board agreed to allow Bucher to carry out his duties at chief executive, albeit without a seat in the boardroom.

In addition, last week it was revealed that Debenhams had started a consultation period with support centre staff based in London and Taunton, which could result in around 60 redundancies out of a total support centre workforce of 1200.

The job cuts are thought to be part of the beleaguered retailer’s ongoing cost-cutting drive amid its wider turnaround scheme, and are separate from the thousands of potential job cuts that could derive from Debenhams’ planned closure of 50 stores in the next few years.

The embattled department store also unveiled a historic GBP 491.50 million statutory loss for the full-year during its preliminary report in late 2018.