Debenhams appoints administrators for second time in a year
UK high street stalwart Debenhams has appointed administrators for the second time in 12 months, after calling on Begbies Traynor to broker a rescue deal to prevent its liquidation. According to reports in the British press, creditors of the retailer had threatened legal action, which could have pushed Debenhams into liquidation.
Founded in the 18th century as a single store in London, Debenhams grew to 178 locations across the UK, Ireland and Denmark before it hit troubled waters in 2018. As the retail sector in the UK in particular continued to endure a torrid period, however, this saw the shopping institution subjected to a spectacular fall from grace.
In April 2019, the long-suffering high street entity finally collapsed into a pre-pack administration, wiping out equity for shareholders including Sports Direct. The deal meant Debenhams was able to access significant additional funding, preserving 165 of its stores, though its previously announced plans to close around 50 under-performing stores in the following three to five years remained in place – indicating drastic changes were still needed to secure the brand’s long-term future.
The need for a quick turnaround saw Debenhams’ new ownership of lenders consortium Celine UK appoint Alvarez & Marsal (A&M) Managing Director Stefaan Vansteenkiste as the company’s Chief Restructuring Officer. Following this, Celine pumped £200 million in fresh funding into Debenhams "for the financial restructuring process and to fund the company's operating turnaround", with the closure of 50 stores and rent reductions for others rubberstamped by landlords and creditors in May 2019.
Vansteenkiste’s stewardship of the rapidly moving turnaround operation was initially rewarded in August, when the A&M professional was appointed as Debenhams’ new Chief Executive Officer – but just seven months later, he has been forced to call in administrators for the second time in a year. Professionals from Begbies Traynor now have a 10-day window to find a rescue deal for Debenhams, whose management said the business needed the protection that the administration procedure provides, as some creditors were threatening legal action which could push the business into liquidation.
Citing the “unprecedented” conditions currently facing retailers amid the coronavirus lock-down gripping the UK, CEO Vansteenkiste said he was working with landlords and pension trustees, while “striving to protect jobs and reopen as many Debenhams stores as we can, as soon as this is possible.” The majority of the group’s employees in the UK are being paid under the Government’s Covid-19 furlough scheme, after its order for all non-essential stores to close. The retailer has also written to its landlords asking for a five-month rent holiday. Debenhams is meanwhile continuing to trade online across the UK, Ireland and Denmark.
Julie Palmer, a Partner at Begbies Traynor, said, “Debenhams has been in financial difficulties for a while so this doesn’t come as a major surprise, but it will leave its 20,000-plus strong workforce in a precarious position during the ongoing uncertainty.”
The news comes among a flurry of administrations in the UK economy – where a number of previously struggling companies have been dealt a fatal blow by the sudden event of Covid-19. Like Debenhams, Carluccio’s had been working with restructuring specialists for some time before it collapsed in March, while Flybe also succumbed to previously existing debt thanks in part to the crisis caused by the pandemic.
