They say the administration will give the company the protection it needs “from the threat of legal action” by its creditors, while its 142 stores are closed due to Covid-19 restrictions.
His creditors have reason to be angry. The company is refusing to pay rent for the next five months and is asking its owners to accept a new round of large and permanent rent reductions.
Suppliers are concerned that Debenhams will use the administration as a way to avoid paying for the summer stock it ordered and will now find it difficult to sell.
Debenhams says she will pay suppliers who “continue to provide goods and services during the administration.” This offers certain guarantees for new orders but, above all, not for goods or services already delivered.
And it is unclear whether the owners of the company, a consortium of hedge funds and banks led by Silver Point Capital, will be among the losers. Silver Point purchased a considerable amount of Debenham debt at a discount. Is he ready to accept a loss of cash on his investment?
Debenhams has closed 22 stores in the past year. Another 28 are expected to close in the next 12 months.
In a statement, its managing director, Stefaan Vansteenkiste, said: “We are working to protect jobs and reopen as many Debenhams stores as possible for trade, as soon as possible. “
Debenhams is against it and it is not the only one. Retailers like New Look and Sir Philip Green’s Arcadia Group say they have trouble paying their rent. The big mall owners, Intu and Hammerson, said they were struggling to recover it.
The longer the retail sector remains closed, the more likely it is that retailers will fail.