Struggling department store Debenhams is reportedly considering entering into a Company Voluntary Arrangement (CVA) as it ramps up its store closure programme.
The retailer is in discussions with property agents to determine the rent it should pay on its store estate and may make the move for a CVA before the next quarterly rent bill is due at the end of March, according to The Sunday Times.
Debenhams operates 166 stores and has already announced it would be closing 50 stores in the next three to five years. Its latest plans could involve the closure of 20 stores this year alone depending on the level of rent reductions it may or may not be able to negotiate with landlords.
The CVA is one of a number of conditions the store’s lenders are said to be demanding in exchange for extending credit lines, and another would be raising money from shareholders via a rights issue (effectively offering existing shareholders the right to buy newly issued shares).
Any refinancing and restructuring will have to meet with the approval of the retailer’s largest single shareholder, Mike Ashley of Sports Direct, who owns just under 30% of the shares in the business.
Ashley made his presence felt at a recent company meeting by using his votes to oust chairman Sir Ian Cheshire from the board. CEO Sergio Bucher was also required to step down from the board but remains as CEO with a reporting line to the board.
The retail tycoon recently offered Debenhams a £40m loan, which was declined under Cheshire’s rein, a decision he criticised strongly. He is known to have ambitions to merge Debenhams with his other department store, House of Fraser, which he bought out of administration last August.
Ashley has been busy hoovering up distressed retailers and just last week won the race to acquired Sofa.com and towards the end of last year he bought Evans Cycles. He is currently in the mix to acquire distressed music retailer HMV.
On Friday it was revealed that, should Ashley be successful in his bid for HMV, his retail empire would fill 400 football pitches or 16.5 Westfield Londons. Should he end up buying Debenhams his empire would be greater still.