David Jones collapses, store closures expected before Christmas
David Jones has been handed over to administrators and receivers for the first time in its 188 years of trading which is expected to trigger store closures and mass layoffs in the lead up to Christmas.
Staff were informed this morning that its board voted to appoint voluntary administrators from McGrathNicol. The failed retailer’s lenders then appointed FTI Consulting as receivers to the group, and they will run the business until it is restructured and put up for sale.
“David Jones is an iconic company and so many Australians have stories and memories of visiting DJ’s stores and I thank customers, our team members and our partners for their continued support for David Jones through this period,” chief executive Erica Berchtold said in a statement announcing the appointment of administrators and receivers.
“We have a well-developed plan on how to reset the business for the future and will be working with the Administrators, the Receivers and our secured lender as we continue to pursue that reset of the business”.
A statement from FTI this morning said Christopher Hill, David McGrath and Joanne Dunn have been appointed receivers and managers of David Jones’ holding company (ACP Riley Street Midco Pty Ltd) by the companies’ secured lender following the appointment of voluntary administrators.
“David Jones’ physical and online stores are continuing to trade under the control of the receivers, whilst they review the current operations,” FTI said.
“We understand the current retail trading environment, rising costs, a significant and outdated retail footprint, and supply chain challenges have led to this point,” FTI receiver Hill, said.
“Voluntary Administration and Receivership provides breathing space and an opportunity to restructure the business. We will manage this process carefully, mindful of the impact on some stakeholders but also recognising the need for difficult decisions.”
The statement said a transaction process seeking offers for a recapitalisation of the business or a sale as a going concern will commence immediately, and will be managed by the Voluntary Administrators, McGrathNicol.
Stores facing closure include David Jones locations in Westfield Parramatta, Warringah Mall, in NSW, Carindale, Indooroopilly Shopping Centre, Robina Town Centre, Sunshine Plaza in Queensland, Westfield Marion in South Australia, Westfield Doncaster, Southland in Victoria, Carousel, Booragoon and Karrinyup Shopping Centre in Western Australia have been earmarked as highly likely to close, according to analysis by financial services firm MST Marquee.
The collapse will wipe out the investment by Anchorage Capital, and is expected to generate significant losses for unsecured creditors. This includes gift voucher holders and suppliers which are believed to be owed tens of millions of dollars.
The collapse was triggered after the department store operator’s private equity owners failed to reach a deal with major landlord Scentre Group on store closures and its rent bill.
Westfield owner Scentre Group, which operates 17 shopping centres in which the prestige department store is located, rejected a restructuring proposal put forward by David Jones. A counter-proposal by Scentre was subsequently rejected by David Jones’ board of directors on Wednesday.
Scentre Group chief executive Elliott Rusanow said David Jones had not paid rent since October and “therefore are in breach”.
“We have made a generous offer to Anchorage Capital Partners that would have facilitated the continuation of David Jones trading,” Rusanow said in a statement. “That offer has disappointingly been rejected by them.”
David Jones’ initial restructuring proposal to Scentre involved closing nine stores in its shopping centres and in February exchanging $45 million in bank guarantees held by Scentre for equity in the retailer.
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