Debenhams proposes 22 store closures through CVAs

Debenhams has launched company voluntary arrangement processes as part of a proposal to shut up to 22 stores by 2020. The proposed closures are in: Altrincham, Ashford, Birmingham Fort, Canterbury, Chatham, Eastbourne, Folkestone, Great Yarmouth, Guildford, Kirkcaldy, Orpington, Slough, Southport, Southsea, Staines, Stockton, Walton, Wandsworth, Welwyn Garden City, Wimbledon, Witney and Wolverhampton. These stores will have 50% rent reductions until Q1 2020, after which they will shut. For 39 of its 166 stores, leases will be kept at current rents. The remainder will see rent bill cuts of between 25% and 50%. All compromised leases will have mutual landlord and tenant break clauses during the five-year term of the CVA. A further seven non-retail site leases will also have varying rent reductions and early lease breaks. Creditors will vote on the proposals on 9 May. The CVAs relate to Debenhams Retail Limited, the main trading entity, and Debenhams Properties Limited. Terry Duddy, executive chairman of Debenhams, said: “The issues facing the UK high street are very well known. “Debenhams has a clear strategy and a bright future, but in order for the business to prosper, we need to restructure the group’s store portfolio and its balance sheet, which are not appropriate for today’s much-changed retail environment. “Our priority is to save as many stores and as many jobs as we can, while making the business fit for the future.” Store closures are expected to begin after Christmas. Debenhams previously outlined aims to close up to 50 of its 166 stores over the next three to five years. The total estate measures around 15.8m sq ft, according to Radius Data Exchange. Further closures will be confirmed “in due course”. The retailer, which has already confirmed the closure of its Lodge Farm warehouse, is also considering the consolidation of its three warehouse facilities. Debenhams said that assuming the CVA becomes effective, a fund of a maximum value of £25m will be available for creditors compromised by the CVA to “participate in future growth of the UK business”. The business entered administration earlier this month and was immediately sold to a newly incorporated company controlled by the lenders, which comprise a mix of banks and US hedge funds including Barclays and Bank of Ireland. The banks paid £101.8m for the retailer and took on £520m of debt and pension obligations for the group, in the pre-pack agreement. The proposed nominees of the CVA are Jim Tucker and Ed Boyle from KPMG’s restructuring practice. The 22 store locations Altrincham Ashford Birmingham Fort Canterbury Chatham Eastbourne Folkestone Great Yarmouth Guildford Kirkcaldy Orpington Slough Southport Southsea Staines Stockton Walton Wandsworth Welwyn Garden City Wimbledon Witney Wolverhampton To send feedback, e-mail pui-guan.man@egi.co.uk or tweet @PuiGuanM or @estatesgazette