Homebase ‘requires major write-down’

The British parent company of DIY chain Homebase Ireland will be asked to accept a major write-down on the more than €30 million it is owed by the Irish operation, which collapsed into examinership yesterday, putting 558 jobs at risk.

Kieran Wallace of accountancy firm KPMG was appointed by the High Court as interim examiner to Homebase House & Garden, which operates 15 stores in the Republic. It asked for court protection after its parent, Home Retail group, withdrew financial support. A rescue is deemed "unviable" without a significant write-down for the UK parent.

The company, which blamed the economic downturn and high rents for its difficulties, has earmarked three of its stores – Carlow, Castlebar and Fonthill in west Dublin – for closure. "In addition, the future viability of the remaining 12 stores will depend on a number of factors including securing the agreement of individual landlords for improved lease terms," the company said.

The Irish Times understands that the Homebase outlet in Nutgrove Retail Park in Dublin is the only store in the group that is profitable. It is understood the company previously asked its landlords for help to cut its €10.3 million Irish rent roll, but any offers it received were "insufficient".

Rent reviews
Retail Excellence Ireland (REI), the industry lobby group that has campaigned for the abolition of upward-only rent reviews, said Homebase could require rent reductions of up to 50 per cent.

REI said in recent weeks it met with senior Government ministers to drum up support for urgent legal measures to address unsustainable rents. It wants legislation to enshrine the right of landlords of troubled retailers to receive compensation for repudiating leases. REI believes this will address constitutional issues cited as an obstacle for banning upward-only reviews.

It also wants to fast-track elements the Companies Bill, proposed by Minister for Enterprise Richard Bruton, that allow for a low-cost "examinership-light" process that retailers could use to drive down boomtime upward-only rents.

Mr Bruton’s spokesman said the Bill is expected to be enacted in 2014.

'Good for it'
David Fitzsimons, chief executive of REI, said landlords had taken the view that the big parent companies of international retailers here are "good for it" when it comes to upward-only rents. But the recent B&Q examinership had shown that not only can the leases be repudiated, the parents' guarantees can too.

Homebase’s industry rivals B&Q and Atlantic Homecare have both used examinership in recent months to force rent cuts.

The company’s turnover to the end of March 2006 was €67.6million, but the court was told it fell to €46.3 million to the end of March 2013. Its auditors, PriceWaterhouseCoopers, prepared the Independent Accountants’ Report for the examinership application.