Debenhams is seeking to reassure the City it is in financial good health after a top credit insurer cut cover to suppliers of the troubled retail chain.
Euler Hermes is understood to have reduced cover amid growing concerns about the department store giant’s ability to pay its bills in full and on time.
A credit insurance industry source said the decision to reduce cover would be taken to “avoid unacceptable risk” and was a “similar sign to what other unsecured creditors might do” to limit exposure to the risk of unpaid bills.
The source added that credit insurers were closely scrutinising retailers as they come under increasing pressure from online rivals.
“There are a lot of companies out there in the scene that have a more traditional property portfolio and that are exposed financially,” they said.
Debenhams has issued three profit warnings this year, blaming “increased competitor discounting and weakness in key markets” in its most recent update last month. Rival credit insurers Euler Hermes and Coface have also cut back cover to suppliers of the retailer, according to The Sunday Times.
The changes apply to new business, and existing supplier contracts are understood to be unaffected. In a statement, Debenhams said it had a “healthy balance sheet and cash position”.
“All the credit insurers continue to provide cover to our suppliers and we maintain a constructive relationship with them. It is well-documented that market conditions are challenging, but Debenhams continues to be profitable, has a clear strategy in place and is taking decisive actions to strengthen the business,” the firm added.
Debenhams is the latest retailer to come under pressure, after House of Fraser was forced to shutter 31 stores and axe 6,000 jobs, Marks & Spencer said it will close 100 stores, and John Lewis warned its profits will be “substantially lower” this year.