Debenhams moves to cut rent roll at loss-making Irish stores

The Debenhams stores for which the British-owned retailer wants court approval to repudiate its leases include Limerick, Waterford and at the Square shopping centre in Tallaght. This potentially puts these three outlets most at risk out of its overall estate of 11 stores from the ongoing examinership process.

It is understood the three stores are all heavily loss-making with upward-only rents sucking up a larger portion of store revenues compared to the chain’s other outlets.

Debenhams, which entered examinership in May, has said that it is unlikely to get any further in its attempts to cut the rents at the three stores. Marathon Asset Management is among the landlords at the threatened outlets.

While the High Court can repudiate the leases, it cannot wipe out the rental guarantees given to landlords by Debenhams’ UK parent company. If the parent gives a new guarantee, however, the rent can be adjusted downwards.

Rent roll

The retailer’s inability to cut its total rent roll of €25 million was cited as a major factor in its decision to put the company into examinership, which led to the court appointment of restructuring expert

Kieran Wallace

of

KPMG

.

The move to repudiate leases at some of its stores may bring other Debenhams landlords to the negotiating table.

Papers filed as part of the examinership application show the retailer has a particularly fractious relationship with the Roche family, who sold Roches Stores to the British chain in 2006.

Talks

The Roche family still owns the biggest and most successful Debenhams stores, at Henry Street in Dublin and Patrick Street in Cork. Filings by

Richard Roche

, who was executive chairman of Roches Stores, refer to two years of talks with senior Debenhams executives over the future of the two outlets. Mr Roche claimed Debenhams walked away from the talks, although the retailer disputed this version of events.

It is expected that Debenhams’ Irish landlords will file papers to the court next month, prior to a hearing that is scheduled for July 18th.

Meanwhile, Debenhams is braced for the possibility that Sports Direct retailer Mike Ashley may try to force his way into the examinership process.

The examiner, Kieran Wallace, has received two expressions of interest in a survival plan for Debenhams' Irish arm – one from the UK parent and the other from Mr Ashley's Heatons group. The examiner last week chose to award preferred bidder status to Debenhams' UK parent company.

Rumours are swirling that Mr Ashley could yet try to force the examiner to further consider his bid. He tried similar tactics when he attempted unsuccessfully to buy sports retail chain Elverys out of examinership in 2014.

Mr Ashley’s spokesman did not return a call for comment on Wednesday, while Debenhams was unavailable for comment.