With the accountancy firm KPMG on standby to handle an insolvency process, Debenhams has reportedly failed to make a top-up payment to its pensions scheme this month, meaning that around 10,000 members could be worse off if the company enters administration.
On Friday, April 3rd, news emerged that the 242-year-old retailer was preparing to make a decision on whether to file for bankruptcy. This would be the second time the struggling retailer had fallen into administration, following a process 12 months ago when its current owner launched a CVA.
The potential administration would come just days after Debenhams put the vast majority of its workforce on furlough after it was forced to temporarily close its stores due to the coronavirus pandemic.
The department store has said that it intended to reopen the business after the lockdown and will continue to trade online for the time being.
However, for some 10,000 employees, an additional worry has emerged when The Sunday Telegraph reported that Debenhams had failed to make its April top-up payment – something that had previously been agreed with trustees.
A Debenhams spokesman said that the money had not been transferred as per the agreement, and that permission had not been sought from the Pensions Regulator.
The company’s pension scheme is also reportedly in significant debt.
It has been outlined, however, that filing a notice of intention to appoint administrators would be designed to protect Debenhams from legal claims from creditors during the COVID-19 pandemic. The Pensions Regulator has also recently announced that companies could access a three month pension contribution holiday over the COVID-19 disruption period.
It is expected that Debenhams will detail its decision surrounding administration this week. The retailer has been left with hundreds of millions of pounds of inventory on order from suppliers that it no longer requires due to the temporary closure of all non-essential shops to help stop the spread of COVID-19.