Debenhams seeks to repudiate rents as 'survival' deadline looms
Rents guaranteed by UK parent company at the heart of survival scheme
Debenhams Retail Holdings (Ireland) Limited (DRIL), which is fighting for survival after placing 11 of its stores into examinership, wants to repudiate at least three of its rental leases.
Last Thursday the High Court received an early ex parte (one-sided) application to repudiate several leases.
The company applied for court protection last month after its UK parent, Debenhams plc, to whom it owes €46m, withdrew financial support.
Some 2,265 jobs, including 500 concession staff, are at risk unless a survival scheme is approved.
Last Wednesday High Court judge Mr Justice Brian McGovern extended time for examiner Kieran Wallace to finalise his report. He continued court protection to July 20.
However, on Thursday the High Court received the one-sided motion to repudiate the leases and the court will now sit again on Tuesday to hear the repudiation motion.
The rents are a core issue in the planned survival scheme, as Debenhams' UK parent guaranteed them.
In court papers, Debenhams Ireland cited its annual €36m payroll costs and €25m upward-only rent roll as the key reasons why the company is no longer viable. It said that attempts to reduce rents that "substantially exceed" market rates have been unsuccessful due to the upward-only rent review clauses in the relevant leases, most of which have another 15 years to run before they expire.
Failing a successful renegotiation of rents during the course of the examinership, the High Court has the power to repudiate Debenhams' leases.
The guarantees by the parent company cannot be repudiated.
However, following a major decision of the High Court in 2012, if the guarantor agrees to enter into a new lease, the rent can be reviewed upwards or downwards (or stay the same).
Debenhams sought court protection in May arising from consistent losses sustained since the recession in 2007 and after withdrawal of support of its UK parent company.
Kieran Wallace, of KPMG, was appointed examiner after the court was told an independent expert believed the company had a reasonable prospect of survival if certain conditions were met, including securing court protection and approval of a survival scheme with the company's creditors.
Dooroy Ltd, landlords of DRIL's stores in Henry Street, Dublin, and Patrick Street, Cork, previously told the court it believed the withdrawal of support by DRIL's parent was the cause of DRIL's "collapse" and the parent was the entity "calling the shots" in negotiations.
Sunday Indo Business