Landlords are readying themselves for a possible company voluntary arrangement (CVA) from Debenhams as the department store continues talks with property owners.
Last October, Debenhams announced plans to close 50 stores in the next three to five years, as it posted a £491.5m statutory pre-tax loss for the year to 1 September 2018. A CVA would accelerate the rate of store closures.
Debenhams declined to comment but Drapers understands the retailer is exploring several options, including a CVA.
Several property sources told Drapers they thought the retailer would file for a CVA ahead of its next quarterly rent deadline at the end of March.
“We are expecting Debenhams to file for a CVA before the deadline in March, with all landlords working on contingency plans should the space become vacant. The impact on landlords will become significant,” one property adviser told Drapers.
One property agent said the retailer appeared to be “pushing” towards a CVA: “I have been trying to work with Debenhams to offer a simple route out with a particular store, but they have had a change of tack in the last few weeks and seem to be pushing down the CVA route.
“I think they’re running out of time as the rent deadline approaches. I don’t know how many stores might be affected but I imagine it will be significant. Landlords might consider whether to club together to try to stop this, but right now everything is on a case-by-case basis.”
One retail property consultancy partner said: “Debenhams made contact recently and said they want an urgent meeting, so we are preparing for [a CVA announcement]. A CVA is not the way forward and is slightly unwieldy. If you’re closing 50 out of 160-odd stores, that is quite a big call. If they owe money, it is more likely to be a pre-pack administration.”
Another property adviser added: “I think a CVA will happen because it’s hard to imagine how they can get out of their predicament with how the market is.”
However, another property source said a CVA was unlikely at this time: “It’s no surprise that Debenhams is considering [a CVA] but I think the idea that it’s going to happen in March is a red herring. Debenhams needs to refinance first before it knows what it needs to do with its property portfolio.
“Once it has restructured its debt, those loans will come with terms that might include a CVA but we won’t know until then.”