Small landlords among the biggest losers of Debenhams CVA

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Debenhams CVA
// Small landlords to be hit by Debenhams CVA, if creditors approve it this week
// Debenehams plans to ask small landlords and councils rent cuts of up to 50%
// Debenhams also proposing that 30 local authorities accept a 50% cut in business rates bills

Debenhams is reportedly set to ask small landlords and councils to slash rents and business rates if creditors approve its proposed CVA this week.

According to The Sunday Times, only a quarter of the Debenhams stores earmarked for closures are owned by big property companies and pension funds.

The remainder of them are owned by small landlords and councils, and they face rent cuts of up to 50 per cent if Debenhams’ CVA is approved when creditors vote on it on Thursday.

The embattled department store is also proposing that 30 local authorities accept a 50 per cent cut in business rates bills.

Colliers International head of business rates John Webber said this illustrated how “ludicrous” the business rates regime currently is.

“It is akin to going with a begging bowl to the person who has just robbed you – asking local authorities to grant business rates reductions – and these reductions if granted are only likely to last for a year and as they are discretionary relief, could easily fall foul of State Aid limits,” he said.

“What is ridiculous is that a 50 per cent-plus business rates tax is part of the reason that Debenhams is going through a CVA.

“So, in effect they are asking for mercy from the perpetrator of their desperate state. The rateable values are much too high but the Valuation Office Agency shambolic appeal system means it is practically impossible to do anything about it.

“Added to that the downward phasing of rates bills means even when a rateable value is reduced the bill hardly changes.”

According to Colliers, the rates bill for Debenhams current 166 stores was over £71 million in 2018/9 and this has combined with the additional problem that many of its stores have been paying considerably more in business rates than they should be due to the effects of downward phasing on their rates bills, following the 2017 Rating Revaluation.

Debenhams’ recently-launched CVA includes plans to close 22 of its underperforming stores as early as next year, placing 1200 jobs under threat, and a further 105 stores for rent reductions.

The CVA came after the department store last month appointed administrators who immediately sold the PLC part of Debenhams to a newly-incorporated company controlled by secured lenders.

This was done in a pre-pack administration deal in return for reducing the retailer’s £600 million debt.

Debenhams is now controlled by a consortium of banks and hedge funds, who have confirmed the major restructure via a CVA insolvency process, which will eventually see it close 50 of its worst performing stores.

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3 COMMENTS

  1. Debehams pays the same rates as other retailers such as H&M and Zara.
    It is not the councils who have robbed Debenhams.
    It is the private equity asset strippers and their backers who loaded the company with debt so they could extract millions for their greedy selves.
    If you let an amoral, money-grabbing, bean-counter buy a retailer -this is what happens.
    This story has been repeated across the UK. Once great names in retail, now succumbing to the inevitable result of years of bad management and no investment.

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