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Debenhams Considering CVA and Store Closures Gets £40m of Credit

Written by Robert Moore Marketing Manager 5 March 2019

Debenhams Considering CVA and Credit Insurance Withdrawn

Update on Debenhams CVA

Debenhams has issued a profit warning saying that sales had fallen 8% like for like in February which has spooked the markets leading to a fall of 9% in the shares today (5th March 2019). 

11th February 2019

Debenhams secure a cash injection, valuing around £40m, so that it can buy time to secure a longer term deal with creditors. Their battle for survival continues!

An insolvency deal is still being looked into, to close around 20 stores and renegotiate deals with current landlords.


4th February 2019


It has been reported by the BBC that Debenhams is looking at a Company Voluntary Arrangement (CVA) and will accelerate its store closure program. KPMG have been appointed to advise the firm and they do specialise in retail CVAs. There has been no official announcement from Debenhams but they are expected to update shareholders in the next few weeks.

Atradius has completely withdrawn all credit insurance to the suppliers of Debenhams.  This is a move that will alarm the retail sector as Debenhams is struggling,  but it by no means they are at risk of immediate insolvency.  The problem is that the withdrawal of cover can cause a cash crunch as suppliers demand payment up front.  One of the tests of insolvency is the cashflow test.  So even if the company is profitable, it can still become insolvent.  That said, it does look like the credit insurers are reducing their exposure in the retail sector as this comes just a couple of weeks after Arcadia, the company run by the Tycoon Sir Philip Green, also had its cover withdrawn.

Of course, a CVA is the more radical of all the options probably being considered and the sources close to the company have been divided in what they say is happening.  This reflects the view in the City as some investors are playing down the risks and others are asking for radical action to improve the fortunes of the company.   

One thing for sure is that Michael Ashley is closely watching developments as the biggest shareholder in Debenhams, although he has his hands full with House of Fraser, that he bought out of administration following their CVA.

CVAs have been deployed repeatedly this year as a vicious downturn grips the high street. Any attempts by Debenhams to shed stores may be complicated by its corporate structure. The retailer’s property leases are held under several companies, which could force it to undertake more than one CVA at the same time.

The company has said that it asks lots of consultants to advise and not too much should be read into the appointment of KPMG.

Debenhams have said they expect to have £320m of debt by the end of the year and it now expects pre-tax profits of £35m to £40m, down from £59m last year. 

A company should really be insolvent before attempting a CVA otherwise it can be seen to be using the mechanism to stitch up landlords.  Understandably landlords are getting fed up. 

Categories: What is a CVA or Company voluntary arrangement?

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