Debenhams’ creditors have approved the department store chain’s CVA, paving the way for it to close 22 stores next year.
Debenhams executive chair Terry Duddy said creditors had “overwhelmingly backed” its restructuring plan, surpassing the 75% threshold needed to give the CVA the go-ahead.
Around 1,200 workers will be affected by the coming closures, but the business has said it will redeploy staff where possible.
The CVA, which is being handled by accountancy firm KPMG, will involve around further 30 closures over the coming years and also required Debenhams’ landlords agreeing to big rent cuts.
Debenhams will pay the agreed rent on 39 stores but demanded rent reductions of between 25% and 50% on the other 127.
Duddy said: “I am grateful to our suppliers, our pension stakeholders and our landlords who have overwhelmingly backed our store restructuring plans. We will continue to work to preserve as many stores and jobs as possible through this process. This is a further important step to give us the platform to deliver a turnaround.”
However, property trade body Revo lambasted the result.
Revo chief executive Ed Cooke said: “As Terry Duddy said last week, the CVA will impact only landlords and local councils. So investors, other retailers and the man and woman on the street are suffering as a consequence of historic poor management decisions that left the business in this precarious situation.
“We will continue to work with government and industry bodies to deliver reform of the CVA regime to stop the damaging impact they are having on towns and cities across the country.”
Lenders remain in control
Earlier today, the department store’s lenders, investor consortium Celine, confirmed its commitment to the business after a sales process failed to secure a viable buyer.
Debenhams was put up for sale following its pre-pack administration in early April, but administrators determined that the bids received were “not at the level required to be taken forward”.
The retailer launched its CVA proposal last month to close 22 stores in 2020 and a further 30 over the coming years. Around 1,200 people working across these stores may be affected but the business has said it will redeploy staff where possible.
Debenhams reported a 5.2% slump in like-for-like sales in the six months to March 2 as UK stores sales declined 7.4%.
Debenhams’ UK EBITDA plummeted 48% to £37.1m during the same period.