Debenhams mulls CVA, could quickly close 20 stores
The talk this week is that struggling department store Debenhams is edging closer to a company voluntary arrangement (CVA) and also that the company has secured a lifeline from its lenders while a debt-for-equity swap is a possibility.
The Sunday Telegraph reported that the retailer has been talking to American hedge funds about injecting fresh capital into the business, but that it has also been in talks with Sports Direct boss Mike Ashley, who has an almost 30% stake in the company.
However, in Ashley’s case, it's believed that there are some obstacles in the way of an agreement. The man who also now controls House of Fraser had already had a £40 million loan offer in exchange for a 10% stake in the business rebuffed by the company, even though its current share price puts its total market capitalisation at less than £45 million.
The company is also believed to be pursuing a CVA in order to quickly cut its property costs both through closures and rent renegotiations. It’s currently saddled with lease deals agreed by its previous private equity owner that are set to run for another three decades.
The retailer has previously said that it aims to close around 50 of its underperforming stores within five years, although there has been speculation that up to 90 could close. Sources have said that under a CVA, as many as 20 of them could close as early as this year. Debenhams has 165 stores and employs around 25,000 people and while it’s unclear how many jobs could go this year, the 50-closure plan was forecast to see it shedding around 4,000 posts.
Regardless of the numbers, there is an urgent need for something to be done with rent payments due in late March.
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