Money

Debenhams to cut up to 1,200 jobs and close stores in CVA


Debenhams is to close an initial 22 stores early in 2020 using a company voluntary arrangement, the latest step in a complex restructuring designed to reduce its debts and return the struggling department store group to profitability.

In a statement, the company said that 1,200 employees in the stores had already been notified about the decision. The closure list includes city locations such as Birmingham and Wolverhampton, suburban sites such as Staines, Orpington and Wandsworth and towns such as Folkestone and Great Yarmouth. More stores could close in dependence on future trading performance.

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.”

The company said it would make £25m available to those creditors compromised by the CVA “to participate in the future growth of the UK business.” Creditors are set to vote on the proposal on May 9.

The move comes three weeks after the company’s trading businesses were transferred to a vehicle controlled by its lenders, led by US hedge fund Silver Point Capital, in a “pre-pack” administration and £100m debt-for-equity swap. Last week, Sergio Bucher, the group’s chief executive since 2016, revealed that he would be leaving

Debenhams’ finances are still fragile. Its existing £320m bank credit facility has been extended until June 2020, and it has access to a second £99m facility agreed as part of a refinancing package revealed in March. There are also £200m of bonds in issue, although these are expected to be converted into equity at some point. 

The move is likely to prompt further criticism from Mike Ashley, the billionaire founder of Sports Direct, whose 29 per cent stake in Debenhams was wiped out in the restructuring and who has insisted that only a small number of Debenhams stores need to close. 



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