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'Onerous leases' to blame for Debenhams Ireland's examinership

Debenhams’ Irish business has officially appointed Kieran Wallace, partner at KPMG Ireland, as interim examiner, as the firm’s 2,000 staff wait to find out its future.

Debenhams

 

As reported by Drapers, the retailer, which made a loss of €6.7m (£5.2m) in the last financial year to August 29 2015, was seeking the appointment of an interim examiner to provide court protection while negotiations with landlords and suppliers are carried out. This has now been approved.

All 11 stores will remain open during the examinership, which can last up to 100 days. It is not know yet if any stores will close.

Debenhams’ Irish firm owed its UK parent company €46m (£36m). Debenhams said it was no longer willing to financially support the loss-making Irish business unless a restructuring took place. 

Drapers understands the UK company would invest in a restructured Irish operation, but only if rent costs were cut.

Neil Hughes, managing director of Dublin based accountancy firm Hughes Blake, said “a massive renegotiation” of rents was likely.

“A huge amount of retailers have gone through this process, including Karen Millen and Jack & Jones, as it’s the only way under Irish law to exit onerous leases.

“The examiner has the ability to disclaim [the leases] allowing retailers to hand them back to the landlords and move to new, often nearby, location. There are plenty of empty units near the regional stores so I would think there will be minimal or no job losses.”

Hughes said Debenhams Ireland had two main problems to contend with: disproportionately high rents and slow regional footfall.

“In landmark locations, like some of the Dublin stores, rent was way too high, coupled with subdued trade in regional locations: it’s a twin threat.”

Debenhams employs just over 1,400 people directly in Ireland, 500 of them full-time. Another 800 work at concessions and make-up counters.

Trade union Mandate, which represents most of the staff affected, said it was “shocked and disappointed” by the announcement and has sought an urgent meeting with the company and its examiner.

Gerry Light, Mandate’s assistant general secretary, said: “Obviously our members are upset and worried for their future and they need some clarification on what is happening in the business. Clearly we intend to do everything in our power to protect job numbers and the terms and conditions of employment of our members.”

Landlords of Debenhams Ireland stores include New York-based fund Marathon Asset Management, US investment fund Invesco and the Roche family, that once owned Roches stores, who sold nine leases to Debenhams in 2006. 

In Ireland Debenhams has four stores in Dublin, two in Cork as well as one each in Galway, Limerick, Tralee, Waterford and Newbridge.

 

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