* Chairman says CVA remains an option in the future
* Critical of media "circus" around firm
* Says Debenhams has a future with new format
* Shares rally as much as 4.2 pct
By James Davey
LONDON, Sept 11 (Reuters) - British department storeretailer Debenhams said on Tuesday that while majorstore closures were an option, the company was not activelypursuing this route.
Shares in Debenhams slumped on Monday after news that theremit of adviser KPMG had been widened to include considerationof a Company Voluntary Arrangement (CVA), which allows retailersto avoid insolvency or administration by offloading unwantedstores and securing reduced rents on others.
"The implication of the (weekend) papers was we wereactively driving a CVA with KPMG and it's simply not true,"Debenhams' chairman Ian Cheshire told BBC radio, adding that alloptions remained open for the future.
CVAs have been used by British groups including fashionchain New Look, floor coverings retailer Carpetright,mother-and-baby goods company Mothercare and mostrecently home improvements chain Homebase.
Debenhams, which has issued three profit warnings this yearand whose shares have lost two thirds of their value, sought toreassure investors by rushing out a trading statement on Mondaysaying it would meet analysts' profit forecasts for 2017-18.
"Anyone who's actually studied the subject would know we'renot insolvent," Cheshire said, adding that KPMG has been workingwith Debenhams for three years.
"We saw this sort of circus develop over the weekend. It'slike having a bunch of nosey neighbours watching your house."
"Somebody sees somebody in a suit going into a room, thesecond person concludes it's a doctor, the third personconcludes it's an undertaker and by the time you get to the endof the day you've got cause of death and everyone's lookingforward to the funeral," Cheshire, a former CEO of homeimprovement retailer Kingfisher, said.
EXTRAORDINARY UPHEAVAL
The fall in Debenhams' share price reflected a combinationof structural shifts in retail and an "extraordinary year ofupheaval" in the department store sector which has seen rivalHouse of Fraser go bust and market leader John Lewisissue a huge profit warning, he added.
Cheshire said there was a future for an updated Debenhamsformat in Britain, noting that the department store remains thebiggest seller of make-up in the country.
"We've got lots of things we can do. The challenge for us iswe've identified a new format - now how do we move from thelegacy of many years of very long leases?," he said.
"There is room for ... what I would call the Selfridges ofthe high street, which brings newness and fashion and beauty,"Cheshire said referring to the upmarket department store rival.
Debenhams' shares were up 0.3 pence at 11.9 pence at 0839GMT, valuing the business at 144 million pounds ($188 million).($1 = 0.7653 pounds)
(Reporting by James DaveyEditing by Alexander Smith)
