Debenhams is set to embark on a store closure and business restructuring programme after it won backing from its landlords for a CVA programme that will see it close 22 stores next year.
The vote to approve the CVA arrangements was passed yesterday by more than 75% of creditors, on the same day that Debenhams Group owner Celine confirmed its backing for the business. Following its administration the retail group had been put up for sale to comply with a compulsory marketing process – but administrators have said that no bids were received at the level that would have been needed. Debenhams Group ownership, therefore, remains with Celine, a new company formed by creditors to Debenhams. Celine bought Debenhams Group out of administration last month, in exchange for £200m in new finance and plans for a £100m debt for equity swap.
Terry Duddy, executive chairman of Debenhams, a Leading retailer in IRUK Top500 research, said: “I am pleased our new owners have confirmed our commitment to Debenhams and remain supportive of our plans to restructure the business. We are confident that we will receive support for our CVA proposals, which make sense for all parties and will give us the platform to deliver a turnaround.”
Stefaan Vansteenkiste, CRO, representing Celine, said: “The investor consortium is a committed long-term owner, which has provided Debenhams with £200m in fresh funding for the financial restructuring recess and to fund the company’s operating turnaround. Within the consortium, there is extensive turnaround experience, which we will deploy to support the management’s plan and to position Debenhams for a long-term successful future.”
The approval of the CVA proposals means that Debenhams is now set to close 22 department stores next year out of a total estate of 166 branches. Those 22 are in locations including Altrincham, Canterbury, Wandsworth, Guildford and Witney, while Debenhams’ Lodge Farm warehouse is also closing. Its remaining three warehouses may be consolidated in future. As a result of the store closures, 1,200 jobs will be at risk. More stores are expected to close in the future, although the final number is yet to be confirmed.
The CVA will also see 39 stores trade at current rents, while the balance of 105 stores would see varying rent reductions of between 25% and 50%.
The CVA announcement is key to the Debenhams Redesigned plan of operating a smaller UK store estate with better quality stores. That transformation plan envisages up to 50 closures overall. Debenhams instead plans to focus on fewer but better quality stores, offering a customer experience redesigned around mobile and social for shoppers who want to make an event of their shopping trips. Its new-look Watford store is part of that transformation plan, with a new style of beauty hall, bringing digital into the store, alongside restaurants and, online, social media initiatives such as its beauty club community.
Debenhams can also now put behind it doubts about whether the business would be taken over in some way by Mike Ashley and his Sports Direct business. Sports Direct owned just under 30% of Debenhams and, although it never launched a formal takeover bid, Ashley did make loan proposals that would involve him becoming chief executive of Debenhams.
Image courtesy of Debenhams