Debenhams has entered pre-pack administration with control of the company now falling into the hands of its lenders as part of an administration process. The company has 166 stores, which for now continue to trade, although it has indicated that 50 branches are earmarked for closure in the future.
Its lenders include Barclays and Bank of Ireland, as well as Silver Point and GoldenTree.
Debenhams has passed through a pre-pack administration process. This lets the company sell the trading business, or its assets, as a going concern, without affecting the operation of the business and frees it from the debt burden on the original company.
Debenhams Chairman Terry Duddy said: “We remain focused on protecting as many stores and jobs as possible, consistent with establishing a sustainable store portfolio in line with our previous guidance.”
“In the meantime, our customers, colleagues, pension holders, suppliers and landlords can be reassured that Debenhams will now be able to move forward on a stable footing.”
Adrian Hyde, Insolvency Practitioner at CVR Global, believes only a total overhaul of the Debenhams brand and offering will prevent further financial problems in the years to come.
“Debenhams is a brand that hasn’t done enough to change with the times and fully capitalise on the growing shift of online shopping. The warning signs have been there for some time, especially in their stores that have been accustomed to discounting.”
“It is a massive company with around 140 stores – each of which will have been battling with high business rates and online competition.
“While this looks negative at the outset there will be some highly profitable stores in strong locations, among a large number of loss-making stores in low footfall areas.”
“I think a pre-pack administration is the right course of action; the only other options for an administrator in this situation would be to shut the business entirely, or continue to trade until a buyer was found, which would have been very expensive with the number of stores they have.”
“The troubles at Debenhams have been known about for some time so anyone interested in purchasing will already have thrown their hat into the ring – there would be no need for a period of marketing. The key to a brighter future for Debenhams is having an identity to match those of other successful high street brands such as John Lewis, Top Man or Ikea – everyone knows what those brands stand for; at the moment Debenhams is known for selling discounted clothing, perfume and some household goods – and this needs to change if they are to survive.
“There needs to be pressing reasons for customers to use the stores – and, simply, there isn’t in their current format, and major work is needed for that to happen. Debenhams is the latest in a long line of high street casualties and unfortunately I don’t expect this trend to end any time soon, both in the UK and abroad, in the light of opinions of an impending global recession.”
Cato Syversen, Creditsafe Group CEO said “Debenhams is Britain’s biggest department store chain, 240 years old and a house hold name, but like many in the retail sector and on the high-street it has been showing signs of struggle in the past few years. We have seen the chain fall under the control of lenders and administrators have been appointed to handle the successful sale of the business. Of course this will cause ripples in the retail sector and have repercussions for suppliers.”
“During times of economic uncertainty on the high-street we often see a peak in our sales at Creditsafe and people accessing business reports and that’s because many of our products and tools allow our customers to look at businesses of any size across the World and use our business intelligence data to decide what level of trade, they are going to do with them.”