Debenhams, the embattled UK department-store chain that was taken over by its lenders earlier this month, plans to close as many as 22 stores next year and reduce rents on others in a bid to stay afloat.
The 241-year-old retailer is seeking to shut the outlets as part of a previously announced plan for about 50 closures, Debenhams said in a statement Friday.
The initial shutdowns will affect about 1 200 jobs, the company said.
Debenhams is also in negotiations with landlords to reduce rents and with local authorities to cut property taxes, according to the statement. To facilitate the closures, the retailer is proposing two different company voluntary arrangements - UK court processes that allow insolvent firms to reach agreements with creditors.
Debenhams is struggling under more than 700 million pounds ($903 million) of debt and expensive leases agreed to years ago across its 166 stores in the UK. A debt restructuring, in which lenders including US hedge funds Alcentra, GoldenTree Asset Management and Silver Point Capital took over, culminated in shareholders being wiped out.
One of them - billionaire Mike Ashley, chief executive officer of Sports Direct International - called the move a "national scandal."
Debenhams's store portfolio and balance sheet "are not appropriate for today's much changed retail environment," Executive Chairman Terry Duddy said.
The retailer said comparable sales in the 26 weeks through March 2 fell 5.2%, with earnings before interest, taxes, depreciation and amortisation down 36%.
Under the plans, current rent levels will be retained at just 39 stores. The rest would see reductions of 25% to 50%. KPMG is expected to oversee the CVA process, and creditors will vote on the proposals May 9. The company needs at least 75% support for them to go through.
CVAs have become commonplace on UK shopping streets as bricks-and-mortar retailers struggle to compete with a rise in online shopping coupled with lower spending related to Brexit jitters. Fashion retailer New Look, baby and children's-wear chain Mothercare and floor-coverings seller Carpetright have all turned to the procedures to close dozens of stores. UK stationer Paperchase used the process last month to tie rents to sales.
As part of efforts to turn around Debenhams, its lenders intend to convert 100 million pounds of debt into equity.
They've also hired turnaround specialist Stefaan Vansteenkiste from Alvarez & Marsal as chief restructuring officer.
Debenhams CEO Sergio Bucher stepped down as part of the changes and chairman Duddy has taken over in an executive role on an interim basis.