Debenhams files for administration due to lockdown woes

Debenhams is set to call in administrators after the struggling chain was forced to close all its outlets due to the coronavirus outbreak.

The retailer, which has 22,000 staff and was rescued by its lenders after collapsing into administration only one year ago, said: “This move will protect Debenhams from the threat of legal action that could have the effect of pushing the business into liquidation while its 142 UK stores remain closed in line with the government’s current advice regarding the Covid-19 pandemic.”

Boss Stefaan Vansteenkiste said “the group is making preparations to resume trading its stores once government restrictions are lifted”. However, Vansteenkiste has not said how many of its 142 shops would reopen after the lockdown.

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The company’s struggles have worsened since the coronavirus lockdown began. With more than £600 million of debt, Debenhams wrote to landlords asking for a five-month rent holiday and reportedly asked suppliers for a 31-day delay to some payments as it seeks to conserve cash.

An insider told Sky News that there was a realistic prospect that Debenhams’ clothing suppliers would take legal action against the company for deferring invoice payments during the lockdown.

The Guardian says that if Debenhams does collapse into administration it could “pave the way” for Mike Ashley’s Frasers Group, formerly known as Sports Direct, to revive its interest in the chain.

Last April, the company went into administration after lenders rejected a last-minute offer from Sports Direct to plough £150m into the chain's finances to keep it afloat.

Analysts say the latest development is not unexpected. “Debenhams has been in financial difficulties for a while so this doesn't come as a major surprise,” said Julie Palmer, regional managing partner at restructuring firm Begbies Traynor.

“But it will leave its 20,000 plus strong workforce in a precarious position who will struggle to get new employment during the on-going uncertainty.”