LONDON — In a move aimed at keeping creditors at bay, the British department store chain Debenhams has taken a first step toward bankruptcy protection.
The retailer stressed that its decision was the result of enforced store closures due to the coronavirus pandemic, and that it plans to resume trading in earnest once COVID-19 has abated and the U.K. lockdown is lifted.
The retailer confirmed Monday that it has filed a notice of intent to appoint an administrator. It clarified that the move would protect it from the threat of legal action that “could have the effect of pushing the business into liquidation while its 142 U.K. stores remain closed, in line with the government’s current advice regarding the COVID-19 pandemic.”
The group said it was preparing to enter a “light touch” administration that would see the existing management team remain in place under the direct control and supervision of the administrators. Debenhams has appointed Geoff Rowley and Alastair Massey of FRP Advisory to advise in relation to the possible administration.
As reported, Debenhams — which is in the process of a major debt restructuring program — said it has the support of its lenders and they plan to provide the funding for the administration. The group said it continues to fully engage with all employees and suppliers while operating within a protective arrangement.
“The majority of the employees in the U.K. are currently being paid under the government’s furlough scheme owing to all stores being temporarily closed. Payments to suppliers who continue to provide goods and services during the administration will remain unaffected and be paid to terms,” the company said.
Debenhams said it is continuing to trade online across the U.K., Ireland and Denmark, in line with government guidelines, while the lockdown continues. Customer orders, gift cards and returns are being accepted and processed normally, it said.
Debenhams in the Republic of Ireland is affected by the same trading restrictions as the U.K. and employees have been furloughed under the Irish government scheme. The group’s ring-fenced Danish business, Magasin, is also affected by store closures, but continues to trade online with the benefit of a modern, highly automated distribution facility, Debenhams stressed.
Stefaan Vansteenkiste, chief executive officer of Debenhams, said the circumstances were “unprecedented,” and the company is taking the step to protect the business, its employees, stakeholders so that it can resume trading from its physical stores as soon as the British Government lifts its restrictions.
He said the company is working with landlords, pension trustees, and other business partners in order to protect jobs and “reopen as many Debenhams stores for trading as we can.”
In early March, before the lockdown, Debenhams confirmed that it was proceeding with the final phase of its debt-restructuring plan, which is expected to see the conversion of at least 100 million pounds of debt to equity, which will create “a robust platform for Debenhams’ continuing recovery,” the company said.
At the time, Vansteenkiste said he was keen to proceed with plans to turn the business around. “With committed investors, a strengthened board and a restructured balance sheet we have the platform from which to rebuild a sustainable business,” he said.