Debenhams has written to landlords asking them to consider further rent cuts and store closures as part of its ongoing company voluntary arrangement (CVA), in order to avoid launching fresh insolvency proceedings.
The department store chain entered administration in April 2019 and officially launched its CVA later the same month. Its CVA proposals, which included rent cuts of 25% to 50% on some stores, were approved last May.
Debenhams is expected to close 50 stores in total under the CVA, of which 22 shut in January. The retailer has been in continuing discussions with landlords to determine the next tranche of closures, and how to give the rest of its stores a sustainable cost base.
Drapers understands the company has now advised landlords that it may require steeper rent reductions and further store closures as part of the ongoing CVA. It is understood that this is a “fall-back” option and Debenhams is “considering all options”.
A source close to the retailer said the goal was still to “identify long-term profitability”.
However, another source close to the situation warned that new insolvency proceedings could be on the cards if landlords don’t agree to the proposals: “There would be a fresh CVA if landlords don’t help with significant rent cuts and further store closures as part of the previous CVA agreement.
“A new CVA has been drafted up in the background in case landlords don’t play ball, but we’re all hoping it won’t [be necessary]. It’s a guessing game.”
Separately, Debenhams wrote to landlords last week asking for a five-month rent holiday, starting immediately, as it struggles to deal with the disruption caused by the coronavirus outbreak.