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Cash crisis at Debenhams as credit insurers tighten terms

High street retailer Debenhams faces a cash crunch as its credit insurers reduce cover for its suppliers.

Suppliers are seeking up front payment as one of the retail chain’s leading insurers, Euler Hermes, is understood to have reduced cover dramatically for suppliers, while rival insurers Atradius and Coface are said to have refused to cover new shipments,The Times reports.

The department store is fighting off claims of a cash crunch, insisting its cash position is “healthy”.

Last month Debenhams issued its second profit warning of the year and announced plans to sell Magasin du Nord, the Danish department store chain it owns.

Blaming competitor discounting and weakness in key markets, Debenhams has revised down its profit forecasts for the full year. It now expects pre-tax profit to reach between £35m and £40m, and EBITDA to be between £160m and £165m. Previously it had anticipated profits before tax of £50.3m, which itself is a marked decline from profits before tax of £150m five years ago.

A Debenhams spokesman said: ”Debenhams has a healthy balance sheet and cash position. All the credit insurers continue to provide cover to our suppliers and we maintain a constructive relationship with them. It is well documented that market conditions are challenging, but Debenhams continues to be profitable, has a clear strategy in place and is taking decisive actions to strengthen the business‎.”

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