Debenhams is searching for a new chief executive as it presses ahead with plans to cut its debts after a legal challenge backed by Mike Ashley’s Sports Direct drew to a close. The financial restructuring will result in at least £100m of the ailing department store chain’s £600m-plus of debt being converted to equity.
Stefaan Vansteenkiste, the chief executive, said: “This is great news for Debenhams. We can put the distraction of this litigation behind us and proceed with our plans to turn the business around. With committed investors, a strengthened board and a restructured balance sheet, we have the platform from which to rebuild a sustainable business.”
As part of its battle for survival, the group has closed 22 stores, 19 of which shut in January, resulting in more than 700 job losses. Another 28 of its remaining 141 stores are expected to close next year.
Debenhams has appointed headhunters Spencer Stuart to find a replacement for Vansteenkiste, who joined from the turnaround firm Alvarez & Marsal and took on the chief executive role in August last year. The process, first reported by Sky News, is understood to have been under way for some time as the company tries to secure a retail expert to take the business forward after its overhaul.
Debenhams was taken over last year by a group of its financial backers, including the US hedge funds Silver Point and GoldenTree, after falling into administration. It then used an insolvency process known as a company voluntary arrangement (CVA) to cull unprofitable sites and cut rents. The company is attempting to negotiate further rent cuts as it fights for survival in an increasingly tough market.
The CVA plan was subject to a legal challenge amid pressure from Ashley, whose Sports Direct group’s investment of £150m was wiped out when Debenhams went into administration.
Sports Direct, which was recently renamed Frasers Group, backed the legal challenge to the group’s CVA by a private Salford-based landlord owned by the family of the property investor Aubrey Weis, which owned six Debenhams properties. Ashley’s retail group was blocked from taking legal action.
The legal action was the latest gambit in Ashley’s battle with the department store. The administration and pre-pack deal with Debenhams’ lenders foiled an attempt by the Sports Direct boss to take control of the department store chain, which he wanted to merge with his House of Fraser group.
Debenhams and other British department stores are struggling as shoppers shift to buying online or spending on experiences such as holidays, digital services and takeaways, amid rising costs, including business rates and staff pay.
Beales is closing its 23 stores after falling into administration in January, while House of Fraser has closed seven of its 59 branches and at least three more are to shut imminently.
Last week John Lewis said it was considering closing outlets after profits at its department stores plunged by 65% to £40m.
