Debenhams on Monday 6 April confirmed that it intends to file for administration in order to stave off the potential collapse of the embattled department store chain, putting around 22,000 jobs at risk.
The move will protect Debenhams from the threat of legal action from its creditors during the coronavirus pandemic, the company said, noting that all 142 of its UK stores remained closed due to the crisis.
The step comes almost exactly 12 months after the chain last filed for administration in order to facilitate sweeping cost-cutting measures.
Debenhams said last week that it was “making contingency plans” to prevent the company from collapsing as a result of the crisis, days after it furloughed the majority of its UK employees under the government’s job retention scheme.
The chain’s stores were among the thousands of outlets forced to close following the UK-wide shutdown of non-essential stores.
“The group is making preparations to resume trading its stores once government restrictions are lifted,” Debenhams said on Monday, suggesting it planned to continue trading throughout the administration process.
The chain said that its lenders supported its decision to file for administration, and noted that it was in discussions with employees and suppliers regarding the move.
The process could allow the company to offload its existing financial liabilities before being sold back to Celine, the consortium that currently owns the chain.
Sky News reported last week that accountancy firm KPMG had been lined up to handle the administration process.
Celine, which is backed by a number of creditors such as Barclays and US hedge fund Silver Point Capital, has injected hundreds of millions into the company to support its restructuring process over the past year.
The consortium fought to retain control of the company against Sports Direct tycoon Mike Ashley, who had been Debenhams’ largest shareholder.
Last year, Debenhams moved to close 22 of its least profitable outlets, simultaneously slashing rents at more than 100 of its department stores as part of a company voluntary agreement (CVA).
The group last month wrote to landlords to ask for a five-month rent holiday and further store closures as part of the CVA.
The chain, one of the many bricks-and-mortar retail outlets that has struggled to adapt to the online era, had been struggling under the weight of a mounting debt pile.
Formally incorporated as Debenhams in 1905, the department store traces its history back to 1778, when founder William Clark established a drapers store in London’s West End.
By 1950, Debenhams was the largest department store group in the UK, with as many as 110 stores.
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