Saturday 20 January 2018

Landlord alleges 'contrivance' by Debenhams UK parent company

Nama-supported landlord one of several challenging lease repudiation bid, writes Dearbhail McDonald

Debenhams is facing opposition over leases
Debenhams is facing opposition over leases
Dearbhail McDonald

Dearbhail McDonald

Debenhams Retail Holdings (Ireland) Limited (DRIL) is facing strong opposition from several of its landlords to the repudiation of its leases amid claims that its UK parent company, Debenhams Plc, "contrived" to place it into examinership.

Laseda, the Nama-supported landlord of DRIL's Tallaght store, has claimed the repudiation of its store lease is not necessary to facilitate the survival of DRIL as a going concern as there is no bona fide threat to its survival.

Last May, DRIL applied for court protection for 11 of its stores after its UK parent, to whom it owes €46m, withdrew financial support.

DRIL has applied for more than six of its leases to be repudiated.

The High Court has heard that Debenhams Plc converted an equity position into an inter-company debt, thereby producing a balance sheet negative for DRIL.

Lawyers for Laseda, which is subject to a Nama charge on a number of its assets, told the High Court last week that the application for court protection had the "appearance of a contrivance" the aim of which was to secure the reliefs of examinership.

Laseda and New York-based fund Marathon Asset Management, which holds leases over several DRIL stores in Tralee and Limerick, have sought extensive discovery against DRIL. The discovery sought includes correspondence between DRIL and Debenhams plc on matters including the inter-company debt and margins charged by the parent to its Irish subsidiary.

In court papers, Laseda says that the application to repudiate its lease is not based on the submission t hat the repudiation is necessary to arrest DRIL's continued insolvency, but is instead based on a "more nebulous" argument that the company is not viable by virtue of its obligations under the totality of the leases which it has entered into.

Laseda, which was denied discovery of an up to date profit and loss of other stores within DRIL, says the Tallaght lease was freely and commercially negotiated.

Laseda says its lease should not be repudiated "simply because the current directors of the company, and its shareholders, have now come to regret the decision to enter into the lease because it may have reduced the company's profitability".

The company says that it is DRIL's general trading performance and its ongoing financial relationship with its UK parent which has undermined its profitability.

The case returns to the High Court on Monday. Failing a successful renegotiation of rents, 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).

Some 2,265 jobs, including 500 concession staff, are at risk.

It is understood that Debenhams has sought a reduction of approximately €4 an hour for staff who retained their original Roches Stores contracts after the Roche family sold their interest in their retail business.

Sunday Indo Business

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