LONDON (Alliance News) - Debenhams Group Holdings Ltd on Friday revealed plans to restructure its store portfolio after slipping into administration earlier in the month.
The department store operator set out details of the company voluntary arrangements relating to its main trading unit Debenhams Retail Ltd and property unit Debenhams Properties Ltd. It said all stores would remain remain open during 2019, including through Christmas peak trading, but up to 22 stores will be closed down in 2020.
The company estimates around 1,200 people to be affected by the first phase of store closures. Assuming the CVA becomes effective, it anticipates GBP25 million to become available for creditors.
A company voluntary arrangement allows a company with debt problems or that is insolvent to reach a voluntary agreement with its business creditors regarding repayment of all, or part of its corporate debts over an agreed period of time.
The retailer, in which Sports Direct International PLC owns a 30% stake, said the CVA proposals provide a mechanism to restructure the store estate in line with the October 2018 plan to reduce the current 166 UK store estate by closing around 50 stores. The 11 stores in Ireland remain unaffected by the CVA proposal.
"The CVA does not seek to compromise claims of any creditors other than certain landlords, local authorities and inter-company liabilities. All trade suppliers and the entitlements of employees will continue to be paid in full during this process," Debenhams said.
To become effective, each CVA proposal requires at least 75% approval from creditors and more than 50% approval from unconnected creditors. The creditors meeting is slated to be held on May 9.
In conjunction with the CVA proposals, certain creditors of the retailer have provided GBP200 million of fresh liquidity and have committed to equitise GBP100 million of debt. Value recovery for the shareholders of Debenhams PLC is expected to be nil.
Separately, Debenhams reported its business performance for the 26 weeks to March 2.
Same-store sales declined by 5.2% in the period, with UK stores recording a 5.4% drop and International sales down 4.8%. Adjusted earnings before interest, taxes, depreciation and amortisation, dropped 36% in the 26 week period to GBP65.9 million on lower sales and a 150 basis points decline in margins.
Net debt at March 2 stood at GBP417.4 million.
"The issues facing the UK high street are very well known. We are announcing today the next phase of our restructuring, to reshape our store portfolio which will give Debenhams the platform to deliver a turnaround. With committed funding and supportive new investors this business can look forward to a viable and sustainable future," Chair Terry Duddy said.
