What was the point of Debenhams examinership?

The approval by the High Court last week of a restructuring scheme for Debenhams’ Irish arm secures the future of more than 1,300 jobs, so it is to be welcomed. It also begs the question: what was the point of this examinership?

The restructuring overseen by the examiner, Kieran Wallace of KPMG, will see unsecured creditors hit – yet again – with a 95 per cent discount to help plug a hole in a retailer's accounts that was mostly caused by unsuitable lease arrangements, and not the actions of the unsecured creditors.

The examiner has also overseen the renegotiation of several of Debenhams lease arrangements, securing more favourable terms. There will also be 98 voluntary redundancies among the nearly 1,400 staff. Debenhams UK parent will also reportedly write off €29 million of the €46 million it was owed by the troubled Irish division.

It should not have taken several expensive trips to the High Court, some fractious court hearings and a very public spat with landlords the Roche family, who founded Roches Stores, to achieve this outcome.

The modest 98 voluntary redundancies could have been easily negotiated with the trade unions. The accounting writeoff from the UK parent is also the least it could do, given the error it made taking on such onerous lease provisions.

There is some sympathy for landlords who argue that retailers entered into boomtime upwards-only leases of their own free will, and the State should not retrospectively interfere in private contracts to favour one party.

Then again, if a retailer threatens to go to the High Court claiming insolvency because of those leases, there is little the landlord can do to hold back the tide. The power of upwards-only leases has now been eroded by several examinerships. Landlords must face up to this new reality.

So, why did Debehams and its landlords need an expensive High Court scheme to bridge the clearly surmountable gap between them?

Given that some sort of compromise arising from the court process was almost inevitable, would it not have been far cheaper to negotiate a settlement without going to court? Failing that, they could have gone to arbitration instead of launching an examinership.

It would have been far cheaper. The money saved could have been used to help make those blameless unsecured creditors whole.