Debenhams set for "light touch" administration
Department store Debenhams is on the brink of administration for the second time in a year, the company has confirmed.
With 142 stores closed and the majority of the 22,000 staff on furlough, the current owners want to push the business into administration then buy it back debt-free.
In a statement Debenhams 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.”
The company, which filed a notice of intent to appoint an administrator last week, added it was 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 majority of its 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 formerly listed company was bought out administration by a consortium of its investors (Celine Jersey Topco) led by US firm Silver Point Capital, last year. It subsequently entered into a CVA and in January of this year closed 19 stores. It was planning to close more next year.
It was reported last week that the 242-year-old company had lined up KPMG to act as administrators but at that stage said that no firm decision had been made.
Responding to news that administrators were hovering last week Sofie Willmott, Lead Analyst at GlobalData, said a second administration would merely prolong the demise of the retailer: “Placing Debenhams into administration for the second time within twelve months will tide it over for now, freeing it from debts but ultimately its owners are merely stringing out its demise and its long-term future remains bleak.
"With significant further investment in the business now very unlikely, it is difficult to see what will attract shoppers back once its stores can reopen.”