Debenhams is heading for another major restructuring which could involve more store closures.
It was already in discussions with landlords before the coronavirus outbreak, but those talks have now become more urgent.
Debenhams has already closed 22 stores this year, with a further 28 to shut in 2021 as part of a turnaround plan.
But as a result of Covid 19, it’s having to revise its restructuring plans.
The department store chain fell into the hands of its lenders last April, a group of banks and hedge funds led by US firm Silver Point Capital, after struggling for years to keep up with the competition.
It has also faced rising costs in running its big stores as well as grappling with a huge amount of debt.
It’s now in a Catch-22 situation between its new owners and landlords.
The BBC understands that the lenders don’t want to extend credit to Debenhams, in other words put more money in, unless they know landlords will accept another round of swingeing rent cuts as well as a five month rent and service charge holiday.
If landlords agree, this would probably happen via a CVA – a form of insolvency proceedings. It would be the second CVA Debenhams has undertaken in less than a year.
Landlords are caught between a rock and a hard place. Most are trying to do the right thing and help retailers who’ve seen a collapse in sales but landlords would ultimately go bust if they don’t get rent.
It’s unclear whether Debenhams’ proposals will get the required support from its landlords in time.
One told the BBC: “They’re asking us to accept a deal on rent and service charge based on a percentage of the turnover but in reality, what they’re offering would only just cover the service charge and a little bit of the rent.”
“It’s a Hobson’s choice,” said another property owner. “This is not bully boy tactics by Debenhams it’s done out of desperation to save the business.”
Landlords have been told that a number of restructuring scenarios are being explored which have “varying outcomes” for the business, landlords and Debenhams’ 20,000 workers.
One scenario is likely to be another form of administration with the aim of keeping as many stores open as possible. Debenhams declined to comment.
Right now Debenhams’ 142 stores are closed, along with much of the rest of the High Street.
For Debenhams, this was already a make or break year but it seems that the coronavirus has simply brought all its long running problems to a head.