Debenhams could be broken up between potential buyers as concerns grow about the future of the department stores chain and its 14,000 employees.
Mike Ashley’s Frasers Group, Next and a Chinese consortium are among the parties interested in buying Debenhams’ stores as the retailer’s owners desperately hunt for a buyer.
Its hedge fund owners have enlisted advisers at Hilco, a restructuring firm specialising in winding up retailers, to draw up plans to liquidate the business if all other options fail, Sky News said.
A Debenhams spokesman said that Hilco’s involvement was a “last resort” contingency plan by administrators at FRP. Meanwhile, a sale process run by Lazard, the investment bank, is continuing, although it remains in the early stages. The Times understands that suitors are not interested in acquiring the whole of the business, with the likes of Next and Frasers Group interested in taking over only a package of stores.
Last week the 242-year-old retailer, which still has 124 stores trading, cut a further 2,500 jobs, bringing the business to 6,500 losses since the start of lockdown.
Debenhams tumbled into administration in April for the second time in a year as it sought to protect itself from creditors who were owed money for unpaid rent. The chain is owned by a group of hedge funds, which took control in an administration process last year that removed the company from the public markets and wiped out shareholders.
Debenhams’ problems can be tracked back to a brief spell of ownership by private equity firms after they took control and delisted the company in 2003, piled it with debt and negotiated sale-and-leaseback property deals that locked the chain into expensive, lengthy rents. TPG Capital, CVC Capital Partners and Merrill Lynch Private Equity received £1.3 billion in dividends in only 30 months from the business and refloated it less than three years later, making three times the equity they put into the business during their ownership.
Michael Murray, head of elevation of Frasers Group, said that it was actively looking at Debenhams on a “store-by-store basis and we are only interested in sites where we can heavily invest in a new proposition”. The company could take only a couple of floors of the department stores, split between Sports Direct and its upmarket Flannels brand, as it has done in a new store in Fosse Park, Leicester.
Next has already claimed a number of Debenhams’ properties, particularly in Intu shopping centres, as part of its plans to launch a new beauty and homewares business. A Chinese consortium is thought to be interested, although retail sources remain sceptical after Sanpower’s disastrous ownership of House of Fraser.