Speculation is mounting that Debenhams, the struggling UK department store chain, may be forced to close more stores and potentially enter into another company voluntary arrangement (CVA). This news comes as a surprise, as less than a year ago, Debenhams appeared to be stabilizing after being acquired by a consortium of lenders and receiving approval for its previous CVA.
According to a report by the BBC, Debenhams is currently “revising its restructuring plans” in the wake of the unprecedented challenges facing the retail industry. Discussions with landlords began before the outbreak of the coronavirus pandemic, but have now become more urgent. Debenhams has not yet commented on the situation.
Last spring, Debenhams fell into the hands of its lenders after struggling for several years in the retail sector. The lenders have been supportive since then, providing additional funding. However, the report suggests that lenders are now hesitant to extend further credit unless they receive assurances from landlords regarding additional concessions, such as extended rent and service charge holidays.
It is suggested that another CVA might be necessary to facilitate new agreements with landlords, potentially leading to a greater number of stores being closed compared to the original plans. Landlords themselves are facing their own challenges, with many reporting receiving only a small percentage of the rent due at the end of this month. Some landlords, including Intu, are burdened with significant debt and are trying to reduce it during these difficult times. While many landlords are offering special measures to support smaller tenants, they may be less inclined to make concessions for Debenhams.
In an interview with the BBC, one landlord acknowledged that Debenhams was requesting significant concessions, but understood that the company is trying to navigate through the crisis and emerge successfully on the other side.