Update: Debenhams files for administration

Debenhams today has filed a Notice of Intent to appoint an administrator, naming Geoff Rowley and Alastair Massey of FRP Advisory.

The department store chain explained that the move will protect it 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 COVID-19 pandemic advice.

The group is making preparations to resume trading its stores once government restrictions are lifted, but 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.

A statement noted that it has the support of current lenders and they plan to provide the funding for the administration. The majority of the employees in the UK are currently being paid under the government’s furlough scheme, while payments to suppliers will remain unaffected and be paid to terms.

Current chief executive Stefaan Vansteenkiste 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.

"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.”

In March, it was reported that Vansteenkiste had decided to resign after less than a year in charge of the company.

On Friday, Sky News reported that the department store, which has around 22,000 staff, had lined up KPMG to handle the administration.

“Like all retailers, Debenhams is making contingency plans reflecting the extraordinary current circumstances,” read a statement over the weekend. “Our owners and lenders remain highly supportive and whatever actions we may take will be with a view to protecting the business during the current situation.

Last month, the retailer wrote to landlords asking for a five-month rent holiday and additional store closures as part of its existing Company Voluntary Arrangement (CVA), which was launched a year ago.

Debenhams fell into administration last April, with its biggest shareholder, Sports Direct and House of Fraser owner Mike Ashley, attempting a boardroom coup before a group of other investors took control.

The CVA, which successfully fended off legal challenges last month, included rent cuts of 25 to 50 per cent on some stores and the potential closure of 50 stores. The first tranche of 22 store closures took place in January.

The Sunday Telegraph reported yesterday that Debenhams failed to make payment to its pension scheme this month.

A statement from the company explained that discussions with the trustees and the Pension Protection Fund are continuing for a temporary suspension in contribution payments, given The Pensions Regulator's recent announcement that companies could access a three-month pension contribution holiday over the COVID-19 disruption period.

A spokesman for the Debenhams Pension Schemes said: "The trustees are engaged in ongoing talks with the company with a view to protecting members' interests, and are consulting closely with the Pensions Regulator.

“The talks are confidential and they cannot comment further."

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