The coronavirus lockdown looks about to claim another casualty, as department store Debenhams announced this morning that it is to call in the financial administrators. It will the second time in a year that Debenhams has gone into administration.
Croydon’s Centrale is likely to be affected by tenant Debenhams going into administration
The news will be another blow to Hammerson, the owners of Croydon’s Centrale shopping centre, where Debenhams has one of its 142 UK stores. Previous rescue packages for struggling department stores have included rental holidays or reductions, which have made landlord Hammerson’s business model appear less robust.
And the news will surely only reduce further any prospect of the £1.4billion regeneration of Croydon that Hammerson and partners Westfield have been pondering over for almost a decade, causing a disastrous blight in the town centre.
The most recent “rescue” package, agreed with banks and hedge funds less than a year ago, included agreement to close 50 Debenhams stores, with 22 due to shut immediately after the last Christmas trading period, including those in Orpington, Wandsworth and Wimbledon.
Debenhams was then put through a pre-pack administration that wiped out shareholders. Its new owners, a consortium of banks and hedge funds, then arranged a company voluntary arrangement (CVA) which will have included reductions in rental payments to landlords, such as Hammerson.
Debenhams: not the first department store in Centrale to apply for a CVA
This morning it was being reported that Debenhams wants to protect its assets from creditors during the lockdown, which has seen it forced to close its stores indefinitely.
The move will provide Debenhams 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”. The retailer and the administrators have 10 days to secure a rescue deal.
The company, which has 22,000 staff, was rescued by its lenders after collapsing into administration only a year ago.
The majority of the group’s employees in the UK are being paid under the government’s furlough scheme following its order for all non-essential stores to close.
“The group is making preparations to resume trading in its stores once government restrictions are lifted,” the retailer said.
Debenhams is continuing to trade online, and customer orders, gift cards and returns are being accepted and processed normally.
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Looks like the Croydon Debenhams won’t be re-opening after Hammerson refused to cut their rent.
Assuming these 5 stores are roughly the same size, that’s about 200 jobs gone at each.