Debt-Ridden Debenhams Plc Is Seeking A Reduction In Business Rates

  • May 02, 2019 BST
  • Team Kalkine
Debt-Ridden Debenhams Plc Is Seeking A Reduction In Business Rates

Debenhams Plc is a department store chain that offers clothing, accessories, cosmetics, household goods, electrical appliances, furniture, toys and gifts. It also provides prepared food, financial services and watches repair services.

The company's product portfolio includes a mix of its brands, international brands and concessions. It sells products through an online platform and franchise stores. DEB also offers data on the latest trends, fashion blogs, and style guides for occasional looks.

It conducts operations through subsidiaries including Debenhams Retail plc, Debenhams Group Holdings Ltd, Debenhams Retail (Ireland) Ltd, Debenhams Properties Ltd, Baroness Retail Ltd, Debenhams Direct Ltd and debenhams.com Ltd. The company’s business operations span across the Middle East, Asia-Pacific and Europe. DEB is headquartered in London, the UK

A week before, the department store group Debenhams, has initiated Company voluntary arrangement – a short of insolvency proceeding to renegotiate their expensive rents. The CVA was initiated after the department group went through a financial restructuring programme in which the group's creditors took control of the business and assets of the Debenhams.

Now, in the recent development, the group is also demanding a cut in the business rates of 48-50 per cent for its 58 stores.

One Industry expert said that he assumed demands for a cut in the business rates as a part of CVAs to expand because they stand as a significant component of overall lease costs.

The business rates cost of the department group is around £80 mn a year, but those close to the insolvency process said that the saving from the cut in business rates would be a comparatively small part of £43 mn -£48mn that the group expect to save every year. The reduction in business rates only lasts for the current financial year and not the five-year duration of the CVA process.

Debenhams is not the first retailer who is seeking a reduction in the business rate, and it won't be the last, said Reveo chief Ed Cook.

In the CVA document, the department store group said that this year the number of loss-making stores would be substantially higher than the reported 10 loss-making stores in the last financial year. This assumption was made based on current store sales trend.

The group also warned that, if CVA is not provided within the expected time period, then they have to turn towards administration.

In October 2018, the department group reported a full-year loss on account of steep impairment charges and then on April 09, 2019, the control of Debenhams business went into the hands of the creditors.

Post the department group started demanding a reduction in the business rates, one restructuring expert called it a quite clever move because this is a considerable number in cash terms, but it will not impact the vote that much.

To initiate the CVA process, it requires all creditors vote of last three- quarters.

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