The Debenhams department store chain is to file for administration and has described the conditions facing retailers as “unprecedented.”
It is the second time in a year that the chain, which has more than 140 stores and 22,000 staff, has appointed administrators.
Last year the debt-laden company was taken over by its lenders, and this time the management said the business needed the protection that the administration procedure provides, as some creditors were threatening legal action that could push the business into liquidation. The creditors are likely to be suppliers who have not been paid for stock they have provided.
The retailer’s creditors will now be prevented from pursuing legal action for 10 working days while the company tries to secure a new rescue deal.
The retailer has been battling the effects of £600m of debt, tough competition and the downturn on the high street. It has closed 22 stores this year and has plans to close a total of 50 outlets across the UK.
Stefaan Vansteenkiste, the company’s chief executive, said he was working with landlords and pension trustees and “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 already being paid under the government’s furlough scheme following 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 continuing to trade online across the UK, Ireland and Denmark, and customer orders, gift cards and returns are being accepted and processed normally.
Julie Palmer, a partner at insolvency firm 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.”
Debenhams is one of many retailers in financial difficulties because of the coronavirus shutdown.
Since the lockdown began, several other chains including New Look and Topshop owner, Arcadia, have declined to pay their rent and furloughed their staff. Two of Britain’s largest shopping centre owners, Intu Properties and Hammerson, reported that they had received about only a third of rent due from their tenants for the second quarter of the year on its due date at the end of March.
An extended period of store closures has left an estimated £10bn of clothing piling up in warehouses.