Creditors of Debenhams, the UK department store group that went into a “pre-pack” administration last month, have approved proposals that will allow the group to close 22 stores and reduce rents on over 100 more.
At a meeting held in central London, votes on the two company voluntary arrangements were passed by 95 per cent and 97 per cent majorities.
The CVAs are the final part of a refinancing process that has seen the group’s equity wiped out and its creditors swap £100m of debt for new equity. A group of lenders led by US hedge fund Silver Point Capital now controls the company.
Terry Duddy, Debenhams executive chairman, said the company was grateful to suppliers, pension stakeholders and landlords for backing the plan. “We will continue to work to preserve as many stores and jobs as possible through this process,” he said in a statement.
Sports Direct, which was the biggest shareholder in Debenhams’ equity when it was still a listed company, is believed to have voted against the proposal. It is a creditor because some Debenhams stores contain Sports Direct concessions, but its claims against the company are relatively small. It sent a legal representative, Roger Hutton, according to people present.
Suppliers heading into the meeting were broadly supportive of the proposals. “We’re a long-term partner. We’d like to see Debenhams succeed,” said Mark Cotter, chief executive of Yorkshire-based concessionaire and supplier Baird Group. “A lot will depend on the new chief executive and the strategy. Clearly doing the same thing as they have been doing is not going to work,” he added.
Debenhams has yet to name a new chief executive after Sergio Bucher resigned in April. Sir Terry, the former head of Argos, is currently executive chairman while the lenders have drafted in turnround expert Stefaan Vansteenkiste from Alvarez & Marsal as chief restructuring officer.
“Our clients are still being paid,” said another attendee acting for a supplier. “On that basis we are behind the deal,” he added, while acknowledging that landlords were a lot less happy.
“It will undermine the entire property industry and with it people’s pensions,” said one landlord representative, who declined to give his name.
“There are wider issues if it continues. At the moment it’s just retail property but come the next recession everyone in commercial property will suffer. [The CVA process] just allows tenants to negotiate leases without landlords. It’s not commercial,” he said, adding that investors were being discouraged from the sector as a result.
Sir Terry told the 80 or so creditors present at the meeting, which took place behind closed doors, that “we did not want to be here” but added that “this is not the time for a protest vote.”
The CVA approval followed news that FTI Consulting, which is acting as administrator, had rejected offers for Debenhams. It was required to conduct a sale process as part of the administration, although any buyer would have been obliged to immediately repay over £500m of Debenhams’ debts immediately.