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Arcadia troubles threaten Debenhams-JD Sports rescue talks

Suban Abdulla
·3-min read
A woman walks past a Debenhams store in Manchester in the final week of a four week national lockdown to curb the spread of coronavirus. (Photo by Danny Lawson/PA Images via Getty Images)
Debenhams recently filed for an insolvency process which has allowed it to continue operating while it seeks a buyer or additional funding. Photo: Danny Lawson/PA Images via Getty Images

The collapse of Sir Philip Green’s Arcadia empire has left struggling department store retailer Debenhams in limbo.

Debenhams’ rescue deal talks with JD Sports (JD.L) could be in peril as Arcadia — Debenhams’ biggest concession holder — may soon appoint administrators from Deloitte, with 15,000 jobs at risk.

JD was thought to be in exclusive talks with the department store, which employs 12,000 people and trades from 124 UK stores. The chain was owned by a consortium of hedge fund lenders until it collapsed for the second time in a year, in April.

Debenhams recently filed for an insolvency process which has allowed it to continue operating while it seeks a buyer or additional funding.

If JD drops out of the race, the chain could face being broken up. Previously, The Hut Group (THG.L) is understood to have tabled an offer for the retailers online business.

Restructuring firm Hilco has been lined up to handle the potential liquidation of Debenhams if a buyer for the entire business cannot be found.

The development could push the 207-year-old chain into the hands of the Sports Direct tycoon Mike Ashley, who has made a series of bids.

Ashley invested at least £150m ($199.6m) in Debenhams when its shares traded on the stock exchange, which was wiped out the first time it went bust. But, earlier this month, Ashley withdrew from acquiring Debenhams, after refusing to match the £300m price tag.

READ MORE: Mike Ashley offers £50m lifeline to Philip Green's struggling Arcadia Group

It comes after, Ashley, who has built a reputation for buying out businesses that are going bust, showed an interest to take over Green’s Arcadia Group, on Saturday.

Ashley, who is founder and boss of Sports Direct, reportedly offered Arcadia a £50m lifeline. According to Sky News, Frasers Group has drawn up plans for an emergency loan to Arcadia just hours before its board appoints administrators.

The Sports Direct boss, who runs Frasers Group Plc (FRAS.L), told ITV News that he’s interested in all of the brands owned by Arcadia Group, including clothing retailers Topshop, Topman, Dorothy Perkins and Burton.

Frasers' chief financial officer, Chris Wootton, was quoted on Saturday by Sky News as saying: “We hope that Sir Philip Green and the Arcadia Group will contact us today to discuss how we can support them and help save as many jobs as possible."

Arcadia has been hit by COVID-19 and subsequent lockdowns, which have hammered it’s sales. It made around 500 head office job cuts earlier this year, as it was hit by the first lockdown. It also paused monthly payments to its pension scheme during the first wave but has since resumed them.

Watch: Why job losses have risen despite the economy reopening