High Streets Initiative · 7 April 2020

NEWS: Debenhams files for administration for the second time this year

administration

Department store Debenhams has filed a notice to appoint administrators. Due to the UK’s COVID outbreak, the majority of the retail store’s staff has either been furloughed or made redundant.

The group has stated it is making preparations to resume trading in its stores once government restrictions following the Covid-19 coronavirus outbreak are lifted, with the said filing being a necessary step in that process.

The chain said the process would provide it with protection from the threat of legal action “that could have the effect of pushing the business into liquidation while its 142 UK stores remain closed”.

However, the brand was struggling long before the national lock-down ruling was implemented. The company, which employees 22,000 staff, was rescued by its lenders after collapsing into administration only a year ago.

In addition, it has closed 22 stores, 19 of which shut in January, resulting in more than 700 job losses. A further 28 of its remaining stores have been lined up for permanent closure next year too.

“Debenhams has been experiencing significant financial difficulties for some time and last year announced plans to close 50 stores over three years,” says Simon Underwood, business recovery partner at accountancy firm, Menzies LLP,

“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,” he adds.

Debenhams, which has more than £600m of debt, is still currently trading online in both the UK and Ireland.

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