The Debenhams retail chain has placed its 11 Irish stores into examinership, putting 2,265 jobs at risk, following the failure of rent negotiations with its landlords, including the Roche family that once owned Roches Stores.
Kieran Wallace of KPMG was appointed by the High Court yesterday as interim examiner to Debenhams Retail (Ireland), following an application from the company for court protection.
Debenhams reassured staff and customers at its stores that it was “business as usual” during the period of court protection, which can last up to 100 days. It told the court, however, that the alternative to examinership is liquidation with a deficit of €264 million.
The crux of Debenhams’ difficulties lie in rents set during boom years on upward-only leases. The examiner is expected to seek talks with its landlords to get a reduction in Debenhams’ annual rent bill of €25 million, which it complained “substantially exceeds” market rates.
Leases
The High Court has the power to repudiate leases if agreement with landlords cannot be reached. An agreement with the Roche family will be critical to the success of the examinership. Debenhams acquired nine of its 11 stores in 2006 from the Roche family, and converted those Roches Stores outlets.
The Roche family retained ownership of the properties following the deals and became the biggest landlord to the Debenhams group in Ireland.
Debenhams already operated from Mahon Point in Cork and Newbridge on leases signed before the deal with the Roches, while the Roche family last year sold the Frascati shopping centre in Blackrock to Invesco, which became Debenhams' landlord there.
The landlords at its stores in Blanchardstown and Tallaght are likely to be the developers of those shopping centres.
The Roches appear to be Debenhams’ landlord for about six stores, including its outlet on Dublin’s Henry Street.
Negotiations
Richard Roche
, a member of the family that sold Roches Stores to Debenhams and a director of the family’s property interests, did not respond to requests yesterday seeking comment on the negotiations.
Yesterday, the High Court heard the board of the Irish arm of Debenhams decided to place it into examinership after its UK parent, Debenhams PLC, wrote to local management on Wednesday withdrawing financial support.
The company said its cost base is no longer sustainable, and the parent would not support it until its costs are reduced. It singled out the cost of its rents and also its staff costs as critical for its viability.
