Debenhams stays open but Irish concerns persist as union writes to retailer
Concerns persist for the hundreds of staff employed at 16 Debenhams stores in the Republic and the North as Debenhams said it was trading as normal despite its UK holding company going into administration.
The Mandate trade union which represents many of the over 1,500 staff at the 11 stores in the Republic has written to seek assurances from the company.
But Debenhams in London said the appointment of administrators from FTI Consulting does not affect its stores directly.
“For the avoidance of doubt only the company (which was the group’s top holding company) is in administration — the group’s operating companies, including Debenhams Retail and Magasin Du Nord, continue to trade as normal.
“The group’s commercial relationships with suppliers, employees, pension, and customers are all with the operating companies. Therefore the group’s commercial stakeholders are not adversely impacted by the company’s administration,” the retailer said in a statement.
The group administration involves Debenhams’ lenders taking control of the ailing retailer, wiping out shareholders including the 30% stake held by billionaire Mike Ashley. Debenhams had been hit by a sharp slowdown in UK sales, high rents, and ballooning debt, plus an acrimonious battle for control with its largest shareholder, Mr Ashley’s Sports Direct.
Debenhams’ secured lenders have been in the driving seat in negotiations since extending a lifeline in February. The company gave Mr Ashley an ultimatum last month to commit to a restructuring on creditors’ terms.
The lenders withheld £99m (€115m) of funding until they gained control. The creditor group has included Barclays and Bank of Ireland, along with hedge funds Alcentra and Silver Point Capital.
For his part, Mr Ashley had spent months battling to wrest control of the business, offering a rescue plan that came with the condition he was appointed the chief executive. With tensions increasing between the two sides, Mr Ashley even demanded that Debenhams board members take lie detector tests.
Debenhams was already planning to close 50 of its 241 stores and seek rent reductions to tackle the effects of a wider crisis in UK retailing. The department store operator has struggled to develop its online business as consumers shift purchases to Amazon and other online providers, with Brexit-related jitters hitting spending.
The company rejected Mr Ashley’s offer to underwrite £200m of new funding even after the billionaire boosted the proposal by £50m and asked lenders to write off a smaller amount of debt. His plan was contingent on being named chief executive officer, a requirement that has been a stumbling block for lenders in the past.
The administration is another blow to a UK retail sector already reeling from the collapse of BHS, electronics firm Maplin, department store House of Fraser, and cycle shop Evans. The latter two were snapped up by Mr Ashley.
The Mandate trade union hopes that, as in other cases of retail firms in the UK going into administration, its separate Irish operations will be spared any fallout.
This could be because the Irish stores are trading profitably and are facing comparatively less rental costs.
