Not feeling capital: Debenhams faces growing cash reserve woes as credit insurer scraps cover to suppliers
Embattled department store chain Debenhams suffered a fresh blow today as one of its leading credit insurers turned off the tap for cover provided to the retailer’s suppliers.
Insurance provider Atradius is pulling its entire credit cover for Debenhams’ suppliers, amid fears about the future of the historic retail giant in the run-up to Christmas.
The move will put growing strain on Debenhams’ cash reserves, as suppliers start to demand payment upfront in the wake of insurers withdrawing or cutting credit.
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Today’s setback also comes less than a week after Debenhams unveiled a new turnaround plan to investors, in its latest efforts to revive a business model that has been hit by a combination of growing operational costs and more consumers shifting to online brands.
Debenhams said: “Regrettably, we understand Atradius is reducing cover as a result of repeated press speculation about Debenhams. Credit insurers typically tighten cover when the retail industry is under pressure, and this is an issue affecting many retailers. We are managing this with our suppliers and continue to maintain more than adequate headroom on our facilities.”
The insurer’s retreat is the latest in a long-line to hit retailers this year, as credit firms fear the future of major brands in the wake of several high-profile closures.
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Stationary chain Paperchase fashion brand New Look and Philip Green’s Arcadia business have all come under mounting pressure after Euler Hermes, another leading credit insurer, cut cover for suppliers.
Earlier this month it emerged that Euler Hermes was also cutting the number of products it was prepared to insure for Debenhams, blaming the firm’s third profit warning of the year and credit downgrading.