Debenhams up for sale again as lockdown stymies rescue efforts

Debenhams, the UK department store chain, is seeking buyers in an effort to secure the business and prevent it going into liquidation.

The retail group has appointed the investment bank Lazard to oversee an attempted sale that is expected to start this week, according to sources with knowledge of the discussions.

The move comes after Debenhams entered a “light touch” administration in April, which allows the chain’s directors to file for administration but run the business as normal rather than giving it over to insolvency practitioners.

It is the third time that the struggling retailer has gone through some form of insolvency process in a year as it has battled to adapt to changing consumer habits even before the coronavirus lockdown forced it to close all 142 of its stores.

The pandemic has accelerated a move by consumers to shop more online, leaving department store chains struggling to make up sales.

This month rival John Lewis said it planned to close eight of its 50 stores putting 1,300 jobs at risk. Marks and Spencer said it planned to cut 950 jobs last week as part of a £500m cost saving effort to mitigate the effects of the crisis.

Since the government permitted non-essential retailers to open on June 15, Debenhams has reopened 124 of its stores, which it said were “trading ahead of expectations” despite figures from the British Retail Consortium showing that high street footfall is still about half of usual levels for this time of year.

The group, which also owns the Magasin du Nord chain in the Netherlands, has negotiated new lease contracts with many of its landlords as part of the administration process, moving on to what are seen by retailers as more sustainable deals based on turnover.

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Several buyers have already expressed an interest in Debenhams although a sale is just one of a number of potential options being explored by the retailer’s administrators, FRP Advisory, and its lenders, which include the US-based funds Silver Point Capital, GoldenTree and Alcentra and the UK bank, Barclays.

Others options include the current owners continuing to hold on to the business or the creation of a joint venture with new or existing investors. Liquidation has not been ruled out if further investment is not found.

The chain is hoping to complete the restructuring by September, before the peak trading period in the autumn.

Last year Debenhams went through a prepack administration after rejecting financial support from the billionaire owner of Sports Direct, Mike Ashley, who twice tried to gain a seat on the board.

It then underwent a company voluntary arrangement, a restructuring process that allows businesses to cut rents and close underperforming sites. About 20 stores were closed, with plans under way to shut another 28 when the pandemic hit.

In April, Debenhams was forced to put its 11 stores in Ireland into liquidation as a result of the crisis resulting in about 1,450 job losses.

Lazard and FRP declined to comment.


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