Debenhams denies lenders’ threat to withhold stores’ rescue package

By guest author Sahar Nazir from Retail Gazette

  • Debenhams lenders reportedly said they’ll convert £100m debt into equity if landlords agree to rent reductions
  • Last week, Debenhams said it would give local authorities an ultimatum aimed at securing business rates cuts

Debenhams has reportedly told landlords its lenders may not sign off a debt restructuring unless they consent to further rent cuts, The Sunday Times reported.

Last April, lenders to the department store chain committed to convert GBP 100 million of debt into equity.

A Debenhams spokesperson has now told Retail Gazette: “The commitment of Debenhams’ lenders to a debt for equity swap is not in question.”

The business is now in a position to proceed with the final phase of its balance sheet restructuring, to include the write-down of at least GBP 100 million of debt, as was announced in April 2019.

“The precise timing and location of any further store closures will depend on our continuing negotiations with landlords and councils to determine whether rent and rates bills can adjust to more realistic levels reflecting today’s retail market conditions.”

Debenhams said it would give the local authorities an ultimatum last week aimed at securing business rates cuts as it pushed ahead with its shop closure plans.

Although business rates are set by the government, Debenhams said it was going to ask local authorities to accept smaller sums than they were initially owed.

Landlords had already accepted rent reductions of between 25 % and 50 % through a CVA last May which resulted in 22 store closures – and several more planned in the coming year or so.

Debenhams said its restructuring would benefit the company last year but has continued to be affected by GBP 720 million of debt, which includes facilities that are not fully drawn.

The approval of the CVA allowed Debenhams to gain access to GBP 200 million of new facilities from a consortium of lenders.

An additional GBP 50 million loan was acquired during the Christmas period to help it “survive”.