Be the first to know about every new Coronavirus story

Debenhams is set to enter its third insolvency process in a year to try to avoid legal action by creditors to liquidate the business.

The group on Monday filed official notice that it intended to appoint administrators. The process would be “light touch”, it said, and its managers would continue to run the business under the supervision of FRP Advisory.

“This move will protect Debenhams from the threat of legal action that could have the effect of pushing the business into liquidation while its UK stores remain closed,” the company said.

The group has 142 stores in the UK, which have been closed since the government ordered all non-essential shops to shut as part of its efforts to contain the spread of coronavirus.

Debenhams said it was making preparations to resume trading once restrictions were lifted. It is still selling online, although this accounts for only about a fifth of Debenhams’ revenues.

The group said it had the support of its lenders — a group of investors that includes Silver Point Capital, GoldenTree, Alcentra and Barclays — and they would provide funding for the administration.

It added that payments to suppliers who continued to provide goods and services during the administration would be unaffected.

“Customer orders, gift cards and returns are being accepted and processed normally,” it said.

Chief executive Stefaan Vansteenkiste said the company had opted for administration “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,” Mr Vansteenkiste said.

“We are striving to protect jobs and reopen as many Debenhams stores for trading as we can, as soon as this is possible,” he added, although the company did not deny that more stores may close as a result of the administration process.

Debenhams went through a “pre-pack” administration last April, which resulted in its shares being delisted and its lenders taking control

It then used a company voluntary arrangement, another form of insolvency, to obtain rent cuts and allow it to close shops. About 20 stores have closed already and plans were in place to close another 28, which would leave just over 100 in the UK.

Many observers expect Debenhams will use the administration to close more stores. It has already asked landlords for a five-month rent holiday.

Debenhams’ stores in the Republic of Ireland are not part of the administration. Nor is its Danish business, Magasin du Nord, which continues to trade online.

Geoff Rowley and Alastair Massey of FRP Advisory have been appointed to advise on the administration. 

Get alerts on Debenhams PLC when a new story is published

Copyright The Financial Times Limited 2021. All rights reserved.
Reuse this content (opens in new window)

Follow the topics in this article