Debenhams rescue attempt could cost more than 10,000 jobs

(qlmbusinessnews.com via telegraph.co.uk – – Mon, 14th Jan 2019) London, Uk – –


A daring rescue attempt being drawn up to save Debenhams from going bust could cost more than 10,000 job losses, dealing the biggest blow to the high street since the collapse of BHS.

The Daily Telegraph understands that the chain has earmarked as many as 90 of its high street stores for closure, more than half the current total, as part of a radical turnaround plan.

Debenhams has 165 shops in the UK and Ireland, and 26,000 employees. It has said publicly that around 50 stores could be jettisoned but the board has quietly identified another 30 to 40 that could be offloaded as it seeks to focus on the most profitable ones.

Nearly 90pc of the chain’s pre-tax earnings are generated from a core of 80 to 90 shops, it is understood. Debenhams declined to comment. BHS imploded in 2016 with the loss of 11,000 jobs.

Debenhams plans to push ahead with a three-stage restructuring program despite a dramatic boardroom coup at the hands of Sports Direct billionaire Mike Ashley, who has amassed a 30pc stake in the retailer.

Ashley and fellow rebel shareholder Landmark Capital ousted chairman Ian Cheshire and chief executive Sergio Bucher last week. Cheshire has been replaced by veteran retailer Terry Duddy, while Bucher will continue to run the company without a board seat.

The City fears that Ashley’s extraordinary move could deal a hammer blow to Debenhams’ survival prospects. In The Sunday Telegraph, an insider accused the entrepreneur of “management by hand grenade”. Crispin Odey, who has a 5pc short against Debenhams, said it was “coming to an end”.

The company’s share price hit a record low of 3.8p, while its bonds have crashed to just 49p in the pound.

Bucher is expected to table a formal, three-stage turnaround proposal with lenders in the coming weeks. The complex plans will begin with a loan refinancing and partial debt-for-equity swap; followed by the attempted closure of up to half its stores; and a fundraising from existing shareholders.

However, there are significant hurdles to overcome. Around half of Debenhams’ bank loans have been hoovered up by American hedge funds, while any store closures will need to be approved by landlords.

Ashley, meanwhile, could attempt to block the refinancing, which would almost certainly be fatal. Retail footfall fell 2.6pc in December.

The fate of HMV will be decided this week when a deadline for rescue bids expires, Sky News reported.

By  Ben Marlow