| Debenhams Calls In KPMG

9th Sep '18 by The Phoenix

3 comments 1205 reads

Agree with Mr Scott that a CVA will be the only way out question is when

https://www.bbc.co.uk/news/business-45463870

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The Phoenix

Premium Member

3 comments

Gromley

9th Sep '18

Hi Clarea,

Useful I am sure for you to flag the news; although I am sure many will have seen it anyway.

I am less sure though on the value of your comment :

Agree with Mr Scott that a CVA will be the only way out question is when

I know that Paul has commented on Debenhams (LON:DEB) from time to time, but if there is a specific comment you are referring to then a link would be really helpful.

As I say, I did not see Paul Scott's comment that you referred to, but whilst I would accept that a CVA is a possible outcome, I cannot at this stage see the reason to assume that it is the 'only' outcome; or even a likely one at this stage.

I would be grateful though for your additional insight.

The Phoenix

10th Sep '18

Hi Gromley, todays report pretty much sums up the situation, the link I would have searched for had the same view but wasn;t in as much depth as todays write up by Paul, as your probably well aware the killer for Deb is the future lease liabilities which from memory are north of 8 bil.

Regards

Gromley

10th Sep '18

I had missed Paul being quite so negative, although he certainly was today :

but my analysis of the numbers suggests that the end game is almost inevitable - either a CVA, or a pre-pack administration, with the Debenhams business being sold (maybe to Ashley) in order to raise cash to repay the debt holders. Shareholders get nothing usually.

I would still say that I disagree, somewhat, although perhaps I'm splitting hairs on "relative probability", I still see CVA or old-fashioned administration as a risk rather than the most likely outcome.

Certainly the lease liabilities are a big issue, but thus far they continue to service them and they have not being entirely sitting on their hands here both looking to share the load and discuss the situation with landlords (I might be guilty of being a little naive but I think at the current time these conversations with landlords will be a little less one sided than one might imagine).

I can certainly agree with Paul though when he says :

I feel that there's a risk that DEB might tip into administration. Why take the risk of exposing our portfolios to that, when you don't have to?

To be honest I would not want to be significantly exposed to any discretionary retailer this side of Christmas - I had similar thoughts last year to be honest.

I remain very interesting in DEB as I think there could be a fantastic recovery opportunity here, but I'll be waiting for peak gloom to pass and for there to be some material evidence that the odds are in my favour.

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Debenhams calls in KPMG

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The Phoenix

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