Debenhams survival scheme includes new rent agreements

A survival plan allowing the department store chain, Debenhams Retail (Ireland) Ltd exit examinership has been approved by the High Court.

Under the terms of the plan, the retailer’s 11 stores are to remain open and the vast majority of the company’s 1,400 directly employed staff, some 500 concession staff and 300 cosmetic staff are to be retained.

There will be some 98 voluntary redundancies, but no compulsory job losses. The company operates four stores in Dublin, two in Cork, and others in Galway, Limerick, Newbridge, Tralee and Waterford.

The scheme, put together by the retailer's examiner, Kieran Wallace of KPMG and agreed by the majority of Debenhams' creditors, was formally approved by Ms Justice Caroline Costello at the High Court on Friday.

Last May, Debenhams Retail (Ireland) Ltd (DRIL) sought examinership because of consistent losses sustained since the recession in 2007, high rents, and after the withdrawal of support of its UK parent company, Debenhams Retail plc. The company said it owed its parent €46 million, which DRIL said was unsustainable.

The company will exit the examinership process on August 25th next.

Objection

The only objection to the scheme in court was brought on behalf of a woman who had brought a personal injuries claim against Debenhams. Under the terms of the scheme she would get 5 per cent of any payment due.

Seeking the approval of the scheme, Neil Steen BL for Mr Wallace said the scheme had been approved by the vast majority of creditors and classes of creditors. Only one class of creditors had rejected the scheme, counsel said.

While certain classes of creditors, including unsecured creditors, would only receive some 5 per cent of what they are owed, counsel said that the only alternative to the scheme was that the company go into liquidation.

In that scenario, those classes of creditors would get nothing, counsel added.

Counsel said that the company had under the scheme secured significant cost savings that would allow it to continue to trade. The examiner reached arrangements concerning rent agreements Debenhams had with landlords of seven of its stores.

The parent company Debenhams Retail plc had also agreed to invest in the company by way of a loan. Also historic debts owed by the company had been written off.

In addition counsel said proposals put to the employees unions Mandate and Siptu had been accepted. Some 83 per cent of the workforce had voted in favour of cost saving proposals, counsel said.

Price reduction

It had also been agreed that there would for a period be a reduction in the price charged on goods sold to Debenhams’ Irish companies from interconnected firms.

Supporting the application to approve the scheme, Rossa Fanning BL said the company had not entered the examinership process lightly. It did so after incurring losses of €22.6 million in the last three years.

Ms Justice Costello in approving the scheme noted that under the scheme that a number of cost-saving measures had been agreed that would allow the company to continue to trade as a going concern.

The judge noted the agreement with various parties in relation to rents, which Debenhams had said were now unsustainable.

The company had also secured investment from its parent company, she said. The judge also welcomed the fact that the vast majority of the workers would retain their jobs and that any redundancy in the company would be voluntary.

While she sympathised with the person who had brought a personal injuries claim against the company the judge said the reality was that all creditors in examinership suffer a significant loss.