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A 200 year plus legacy is shutting down for good. Debenhams' demise caps an excruciatingly tough couple of days for UK's retail sector. Image Credit: Agency

London: Debenhams Plc said it's preparing to close its doors for good after failing to find a buyer, in another severe blow for British retail just a day after Philip Green's Arcadia Group began insolvency proceedings.

Debenhams, a 232-year-old UK department-store chain that employs 12,000 people, had been in talks to sell the business to JD Sports Fashion plc, but the sportswear retailer said that it was pulling out of negotiations. JD Sports' decision came after Arcadia, the biggest concession partner of Debenhams, filed for administration. (The brand operates multiple stores in the Gulf through a franchise agreement.)

The news means that within 24 hours two of the biggest retailers in Britain, which collectively employ 25,000 people, have failed, potentially adding to the heavy toll of job losses that have already taken place this year. Debenhams has 124 stores across the UK.

In a statement, Debenhams said that without a sale and in the current business environment, with "the likely prolonged effects of COVID-19", it had no choice but to "commence a wind-down of Debenhams, whilst continuing to seek offers for all or parts of the business". It said it will continue to look at other options, including disposals of parts of the business, while it operates through Christmas.

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No maneuver space

Debenhams was taken over by its lenders, a consortium of financial investors including Silver Point Capital and GoldenTree Asset Management, last year after struggling under a 720 million-pound ($962 million) debt load. At the time, the company rejected rescue offers from retail tycoon Mike Ashley, the founder of Frasers Group and who owned a large stake in Debenhams that was wiped out when the lenders took control.

In April, Debenhams filed for a "trading administration", a UK form of insolvency where the management continues to run the business under the supervision of an administrator while it looks for a buyer.

Time for another attempt?

Ashley may now return once again as a suitor as Debenhams is liquidated. He acquired rival retailer House of Fraser out of administration in 2018. However, Ashley has also expressed interest in buying Arcadia.

Richard Lim, chief executive officer of Retail Economics, said the failure of Arcadia and Debenhams was "truly devastating" for British retail, adding in a written statement: "We cannot overstate the significance of the collapse given the vast property portfolio, number of jobs impacted and the reverberations felt across the industry."