Debenhams has confirmed it intends to appoint administrators and said that the process would 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.
The group said it 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.
The Group has appointed Geoff Rowley and Alastair Massey of FRP Advisory to advise in relation to the possible administration.
Stefaan Vansteenkiste, CEO of Debenhams, 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.
“We are working with a group of highly supportive owners and lenders and anticipate that additional funding will be made available to bridge us through the current crisis period. 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.”
Andy Barr co-founder of www.Alertr.co.uk, commented: “Debenhams has always had such a huge presence on the high street but it still felt inevitable that they were going to be one of the retailers who got hit hard by dwindling interest from consumers; department stores have struggled to keep up with cheaper, online alternatives for years now and the current climate could well be the final nail in the coffin.
“It is a hugely testing time for the high-street; even prior to the Coronavirus pandemic the high-street was in a state of disarray, with a new retailer seemingly going into admission each week but surviving this unprecedented event will be a struggle for even the biggest retailers. Every business needs to be willing to adapt to the changing needs of the consumer and they need to do so quickly, that being said, it could well be too late for the department store giant. Although, they are still actively trading online, it does seem a matter of when, and not if, we see the end of Debenhams.”
Simon Underwood, business recovery partner at accountancy firm, Menzies LLP, said: “Debenhams has been experiencing significant financial difficulties for some time and last year announced plans to close 50 stores over three years.
“The decision to place the business in administration will provide some protection and help to hold off creditors for the time being. This will effectively buy the retailer some time, so more permanent decisions about how to proceed with the current restructuring plan can be made once the trading outlook becomes clearer.
“While the Government has moved quickly to relax some insolvency laws (on 28 March), specifically measures linked to ‘wrongful trading’, further legislative changes to introduce a ‘breathing space moratorium’ are still awaited. Debenhams has decided to take matters into its own hands.”