Debenhams will permanently close a further five of its department stores, all located in shopping centres owned by the property firm Hammerson, putting 1,000 jobs at risk.
The news came as Hammerson’s deal to sell its retail parks to the private equity firm Orion also collapsed. Debenhams fell into administration for the second time in a year last month, as it sought to protect itself from legal action by its creditors during the pandemic.
The latest closures to be announced, which include its stores in the Oracle shopping centre in Reading and in Birmingham’s Bullring, means that 16 of its UK outlets will remain shuttered when lockdown restrictions are eased.
Last month Debenhams said the so-called “light touch” administration, being handled by insolvency practitioners at FRP Advisory, aimed to “get the business into a position to reopen and trade as many stores as possible again when restrictions are lifted”.
Since then, the retailer has been in negotiations with its landlords, and has reached agreement on 120 of its 142 sites, while the future of an additional six hangs in the balance.
The majority of Debenhams’ staff have been furloughed, although its website has continued to trade.
Like other fashion retailers, the department store chain, which employed more than 20,000 people before administration, has been badly affected by the coronavirus lockdown. However, Debenhams was struggling with a £600m debt pile before the crisis led to the temporary closure of all of its stores.
Its deteriorating finances resulted in administration in April 2019, which wiped out the firm’s shareholders and transferred ownership to a group of financial investors including the US hedge funds Silver Point and GoldenTree.
Debenhams has previously used an insolvency process employed by other struggling retailers, known as a company voluntary arrangement (CVA), to enable it to cut rents and close unprofitable stores, including 19 shops which shut for good in January.
Since the coronavirus lockdown it has written to landlords asking for a five-month rent holiday and written to its suppliers to inform them they would be getting their money a month later than expected as it seeks to conserve cash.
Hammerson, one of Britain’s biggest shopping centre owners, said in April that its rent takings had fallen by two-thirds as struggling retailers tried to cut costs. It reported it had received a flood of requests for rent deferrals or waivers as the majority of its tenants had been forced to close their stores during the lockdown.
The company, which owns Brent Cross in London, will now be left with five vacancies in its malls which were previously occupied by Debenhams outlets.
In a further blow to the property company, it said its £400m deal to sell seven retail parks to Orion had been scrapped, after the private equity firm said it would not complete the purchase.
Hammerson said it would keep the £21m deposit it had received from Orion. However, this was not enough to appease investors, and Hammerson’s shares closed 14% lower on Wednesday.
