Debenhams set to call in administrators

Troubled department store chain Debenhams has filed notice of intent to appoint an administrator in the UK, as it assesses the impact of the Covid-19 coronavirus on its business.

It said that an administration will provide protection from creditors in the short term, and ensure the company is able to trade its stores again after the current period of lockdown in the UK is lifted.

The group has appointed Geoff Rowley and Alastair Massey of FRP Advisory to advise in relation to the possible administration.

A statement from the retailer, which fell into administration last year and was taken over by its lenders, and is part way through a company voluntary arrangement process that is being used to close several stores, said today’s move will protect it from the threat of legal action. Any potential legal action “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”, it said.

Debenhams is making preparations to resume trading its stores once government restrictions are lifted, and like most of the retail industry it is still selling online and accepting customer orders, gift cards and returns as normal.

The retailer said it 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. The group said it has the support of its lenders, and they plan to provide the funding for the administration.

The majority of Debenhams’ employees in the UK are currently being paid under the government’s furlough scheme, following the enforced temporary closure of stores. The retailer also said payments to suppliers who continue to provide goods and services during the administration will remain unaffected and be paid to terms.

Debenhams in the Republic of Ireland is affected by the same trading restrictions as the UK, but employees are furloughed under the separate Irish government scheme. The group’s Danish business, Magasin, is also affected by store closures but continues to trade online supported by what the compnay describes as a modern and highly automated distribution facility.

Stefaan Vansteenkiste, CEO of Debenhams, said: “These are unprecedented circumstances and we have taken this step to protect our business, our employees, and other important stakeholders, so that we are in a position to resume trading from our stores when government restrictions are lifted.

“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. 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.”