Reliance quits Debenhams rescue race, could firm lose Oxford Street flagship?

By

Sandra Halliday

Published
Oct 12, 2020

The list of potential bidders for Debenhams has just got smaller with news that deep-pocketed Reliance Retail has dropped out of the race.

Reliance, controlled by India’s richest man, had been viewed as a possible frontrunner to buy up the ailing British department stores giant after it was named as a possible (and surprise) bidder last month.

But The Times quoted a source close to the process saying Reliance is no longer involved, although “multiple parties” are still interested in the auction that’s heading towards its final stage.

Debenhams filed for a “light-touch” administration in April as the UK locked down, but it has found emerging from it to be tougher than some might have expected as retail footfall remains low.

It’s currently owned by a consortium of its lenders, including US hedge funds and its bankers. If the sale process fails and it’s forced to liquidate, Hilco Capital has been lined up to handle that process.

Yet two bright spots are that the firm has seen better-than-expected trading in recent months (even though trading remains tough), and its administration status means exiting unviable stores under a new owner would be a relatively straightforward process.

The company has already closed a number of stores, with successful rivals, such as Next, taking advantage of that to snap up the spaces.

But the company may not be able to hang on to some flagship locations that it might have wanted to retain. For instance, The Times said its Oxford Street flagship has been owned since 2016 by ex-H&M chairman and Sweden’s richest man Stefan Persson through his investment vehicle, Ramsbury. It “intends to exercise a break clause in the lease at the end of the year and has appointed property agents to find a temporary tenant while it works up plans to redevelop the site,” the newspaper reported.

While the site is hugely expensive and is suffering from low footfall at present, it remains a big draw during normal times and is important for the prestige beauty sales that are crucial to Debenhams.

If the retailer is forced to exit the store, the site’s retail space could then be downsized with suggestions that Frasers chief Mike Ashley might be interested in it. He might also seek to take over some other Debenhams sites for his various brands.

Debenhams’ more successful Magasin du Nord Danish subsidiary is being sold through a separate process.