Debenhams is preparing to file a notice of intention to appoint administrators as early as next week, as it continues to struggle amid the coronavirus outbreak.
The department store chain is in talks with several firms, including “Big Four” auditor KPMG, which is said to be “on standby” to handle the process. The prospective appointment would be designed to shield the company from legal claims from creditors during the coronavirus crisis.
A decision to appoint administrators has not been taken and it remains possible that an alternative outcome could emerge. However, a source close to the situation told Drapers that entering administration is “not 100%, but it is highly likely”.
Debenhams intends to still reopen the business after the lockdown, and will continue to trade online in the time being.
- Read this week’s Drapers Interview with Steven Cook, Debenhams managing director of fashion, home and beauty
A Debenhams spokesman said: “Like all retailers, Debenhams is making contingency plans reflecting the extraordinary current circumstances. Our owners and lenders remain highly supportive, and whatever actions we may take will be with a view to protecting the business during the current situation.
”While our stores remain closed in line with government guidance, and the majority of our store-facing colleagues have been furloughed, our website continues to trade and we are accepting customer orders, gift cards and returns.”
Nigel Frith, a senior market analyst at Ask Traders, said: “This one has been on the cards for a while. Debenhams was already on very shaky ground prior to the coronavirus outbreak, 2020 was going to be its make or make year. However, covid-19 has brought all the retailers’ problems to head a little earlier than expected. After 242 years on the high street there is a good chance that many, if not all of the department stores’ doors won’t be opening after the UK wide lock down ends.”
Last month, Debenhams wrote to landlords asking them to consider further rent cuts and store closures as part of its current ongoing CVA, to avoid launching fresh insolvency proceedings.
The department store chain entered administration in April 2019 and officially launched its company voluntary arrangement later the same month. Its CVA proposals, which included rent cuts of 25% to 50% on some stores, were approved last May.
Under the current CVA, Debenhams is expected to close a total of 50 stores, 22 of which 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.