Debenhams department store is set to appoint administrators as early next week to protect the company against claims from creditors as it tries to restructure its business.

 

Like most of the UK’s High Street stores, Debenhams 142 stores are closed. Although the business is still trading online, it has a large amount of stock which it cannot sell. The Coronavirus outbreak has increased pressure on the firm which has already closed 22 stores this year and plans to shut a further 28 in 2021.

The company’s 22,000 staff have now been ‘furloughed’  during the Covid-19 crisis.

Only last year Debenhams was rescued by its lenders after collapsing into administration , and is now understood to be considering filing a formal notice to appoint administrators next week. The legal process provides protection from creditors for 10 working days while a company tries to secure a rescue deal.

Since the Coronavirus lockdown Debenhams, which has more than £600m of debt, has also written to landlords asking for a five-month rent holiday and reportedly asked suppliers for a 31-day delay to some payments as it seeks to conserve cash.

A Debenhams spokesman said: “Like all retailers, we are making contingency plans reflecting the extraordinary current circumstances. 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.

“While our stores remain closed in line with government guidance, and the majority of our store-facing colleagues have been furloughed, our website continues to trade and we are accepting customer orders, gift cards and returns.”

It is expected that the most likely outcome is a pre-pack administration, where a company arranges to sell its business to a pre-determined buyer before administrators are appointed.

New Look

New Look says it is suspending payments to suppliers for existing stock “indefinitely”, telling them in a letter that the stock can be collected by its owners, according to the BBC.

The retailer is also cancelling orders for its Spring and Summer clothing lines and won’t pay costs towards them.

New Look was already facing difficulties before the Coronavirus pandemic struck.
It closed dozens of stores in 2018 and 2019 because of “challenging” retail conditions on the High Street.

A New Look spokesperson told the BBC: “Whilst our online sales channels remain open, albeit on a significantly reduced basis, we have regrettably had to inform suppliers that we cannot place new orders until further notice and will be temporarily postponing outstanding supplier payments until the situation improves.”

“We have not taken this decision lightly and have only done so out of absolute necessity, given the exceptional circumstances we are in. We greatly value our relationships with suppliers and are actively identifying opportunities where they can hold product for use for autumn-winter this year or spring-summer next year.”