Debenhams enters administration to protect it from creditors

News that Debenhams is about to enter administration has led to fears over the future of 22,000 jobs at the department store chain.

The retailer has said that it had appointed Geoff Rowley and Alastair Massey of FRP Advisory to advise on a “light touch” administration of the company, which has 142 branches.

The stores are continuing to take online orders and process returns while they remain closed under the coronavirus lockdown.

The move was described by Debenhams as a step that would protect it from any threat of legal action from suppliers that could push it into liquidation. It is reported that the retailers has millions of pounds worth of stock orders that are unneeded because of the Covid-19 outbreak.

Debenhams has already closed 22 stores this year and has plans to shut a further 28 in 2021. It has furloughed most of its staff who are being paid under the government’s coronavirus job retention scheme.

Stefaan Vansteenkiste, chief executive of Debenhams, said the steps were necessary to ensure the company could reopen shops when the time came, adding: “We are working with a group of highly supportive owners and lenders and anticipate that additional funding will be made available to bridge us through the current crisis period.”

He did not guarantee that all branches would reopen after restrictions were lifted: “With their support and working with other key stakeholders, including landlords, pension trustees and business partners, we are striving to protect jobs and reopen as many Debenhams stores for trading as we can, as soon as this is possible.”

Analysts say Debenhams’ move could lead to company voluntary arrangements (CVA) with creditors. It is thought that lenders do not wish to extend credit to the retailer unless landlords are ready to accept rent and service charge cuts and holidays.

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It would be the second CVA the department store has undertaken in less than a year. In 2019 it was taken over by a consortium of lenders under the name Celine. The lenders included Barclays, Bank of Ireland, Silver Point Capital and GoldenTree.

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