Debenhams ‘could speed up closures after CVA’
Written by Hannah McGrath
Debenhams could reportedly bring forward the closure of 20 stores as part of a potential company voluntary arrangement (CVA) aimed at restructuring its struggling department store business.
The High Street retailer is also reportedly in discussions with lenders to increase its borrowings in advance of a quarterly rent payment which is due on 25 March, amid reports that it is weighing up a CVA with administrators KPMG.
The company is understood to have nearly reached the limit of its £520 million borrowing facilities with current lenders, according to the BBC, while the Sunday Telegraph reported that the company is in discussions over a CVA.
The CVA - a mechanism which enables retailers to renegotiate their rent with landlords - would enable the embattled retailer to accelerate the closure of a number of stores, as part of a restructure that would shutter 50 stores over the next five years, putting a total of 4,000 jobs at risk.
Debenhams is expected to announce plans for the cash injection in the coming days, as the company looks to reshape its finances and shore up balance sheets for the next 12 months.
The company, which currently has 165 stores and employs 25,000 people, has faced increasing pressure after announcing a pre-tax loss of £491.5 million last year following several profit warnings.
Sales for the Christmas period were sluggish, with gross transactions down 3.8 per cent and like-for-like sales down 3.4 per cent on the six weeks to January as the company weathered the shift to online shopping.
Speculation has mounted that Sports Direct owner Mike Ashley, who owns a 29 per cent stake in Debenhams, may be looking to launch another attempt to bail out the business, after Debenhams rejected the offer of a £40 million interest-free loan in exchange for more shares in December.
Early last month, Ashley was understood to be behind a boardroom coup which led to the removal of of chairman Ian Cheshire and chief executive Sergio Bucher from the Debenhams board, although the latter retained the chief executive role.
Debenhams declined to comment.