A department store that has stood for nearly two centuries now finds itself at a familiar crossroads of modern commerce, where the old arithmetic of rent, stock and seasonal hope no longer balances. Its owners and its landlord, Scentre Group, have failed to agree on how to share the weight of a shrinking retail world, and the decision on whether to hand the business to administrators may be made as soon as Thursday. Behind the dispute lies a simple human question: how much time remains for a long-standing institution to adapt before the ledger closes the door.
David Jones Faces Collapse as Rent Talks With Scentre Group Break Down
Potential job losses and store closures for workers at the 188-year-old retailer if administration proceeds.
Nine stores handed back, three at 8 per cent of sales, five unchanged
Mark
Why did the talks actually break down? It sounds like a lot of moving parts.
Mimi
The sharpest point is the unpaid October rent. Scentre says that puts David Jones in breach, and a source called it a key flashpoint. Then each side rejected the other's proposal.
Mark
What did David Jones offer?
Mimi
Hand back nine stores from February, keep three at rent of 8 per cent of sales, leave five on current terms, and release $45 million in bank guarantees in exchange for equity.
Luke
Worth noting that the detail of the counter-proposal from Scentre isn't public. We only know David Jones' board rejected it, and that comes from one unnamed source.
Mark
And Scentre's side?
Mimi
Its chief executive, Elliott Rusanow, went on the record. He called the offer generous and said it was disappointingly rejected by Anchorage.
Luke
Which is still one party's characterisation. We haven't heard David Jones or Anchorage describe why they said no.
Mark
What about the lender, Hilco?
Mimi
Hilco funded above the agreed facility so David Jones could build stock for Christmas. But it also said it had no formal update on the negotiations.
Luke
So administration is expected, not confirmed. The timing, Thursday, and McGrathNichol as administrator both come from the same anonymous source. And nothing here says how many jobs or stores are at stake.
The Pulse
- Talks with landlord Scentre Group have collapsed, leaving David Jones facing a breach notice over unpaid October rent.
- A board meeting on whether to enter voluntary administration is set to decide the store group's fate as early as Thursday morning.
- Lender Hilco has pushed extra funding into the business to carry stock through the Christmas trading season, raising the stakes of any failure.
- Multiple landlords are still being approached to cut costs and close loss-making stores, but the outcome of those talks remains unclear.
- If administrators are appointed, McGrathNichol is expected to take control and a solvency test will determine whether the stores keep trading through December.
A department store that has stood for nearly two centuries now finds itself at a familiar crossroads of modern commerce, where the old arithmetic of rent, stock and seasonal hope no longer balances. Its owners and its landlord, Scentre Group, have failed to agree on how to share the weight of a shrinking retail world, and the decision on whether to hand the business to administrators may be made as soon as Thursday. Behind the dispute lies a simple human question: how much time remains for a long-standing institution to adapt before the ledger closes the door.
On Wednesday evening, the board of David Jones gathered to weigh whether the 188-year-old department store should enter voluntary administration. A decision was expected by Thursday morning, and according to someone close to the talks, the private equity owners were close to making the call.
The immediate breakdown came in negotiations with Scentre Group, owner of Westfield, whose centres host many David Jones stores. Scentre rejected the retailer's restructuring plan and put forward a counter-offer, which the board turned down. The company had not paid rent since October, and Scentre's chief executive said publicly that this put David Jones in breach while his group had made a generous offer that would have let it keep trading.
The rejected plan would have returned nine stores to Scentre, kept three at higher rents tied to sales, and left five on existing terms, in exchange for $45 million in bank guarantees. Lender Hilco had already advanced funds beyond the agreed facility so the retailer could stock up for December, the most important trading period of the year. Meanwhile, talks with other landlords about lowering rent and closing unprofitable stores have not been detailed publicly.
The board is now weighing how long the business can keep trading before appointing an administrator, likely McGrathNichol, and whether it can pass the solvency test. If administration proceeds, the people working in the stores would bear the greatest uncertainty, though no figures on job losses or closures have yet been given.
On Wednesday evening, the board of David Jones was due to meet to decide whether the 188-year-old department store should go into voluntary administration. A decision is expected by Thursday morning, and according to a source close to the negotiations who was not authorised to speak publicly, the retailer's private equity owners are close to making the call.
The immediate cause is a breakdown in talks with Scentre Group, the owner of Westfield, which runs 17 shopping centres where David Jones has stores. Scentre rejected a restructuring proposal from the retailer. Scentre then put forward a counter-proposal, which David Jones' board rejected, the source said. David Jones failed to pay its October rent, and a source described that as a key flashpoint in why the talks fell over.
Scentre chief executive Elliott Rusanow said publicly that David Jones had not paid rent since October and was therefore in breach. In a statement he said Scentre had made a generous offer to Anchorage Capital Partners that would have allowed David Jones to keep trading, and that the offer had disappointingly been rejected.
The original proposal from David Jones was specific. It would have handed nine stores back to Scentre from February, kept three stores at rents of 8 per cent of sales, and left five stores on their current terms. In exchange, $45 million in bank guarantees would be unlocked in return for equity in David Jones.
The meeting involves chief executive Erica Berchtold and two directors, Phillip Cave and Simon Woodhouse. Cave is executive chair of Anchorage Capital and Woodhouse is its managing partner. The board is assessing how long the company can keep trading before it appoints an administrator, which the source said is expected to be McGrathNichol. The source framed the question as a financial calculation: whether the company can meet the solvency test, and whether the parties need to sit down and discuss the finances.
The lender's position adds a complication. Hilco Capital said last week that it had provided funding above the agreed facility to take David Jones through December, traditionally the most important trading period of the year for department stores. A Hilco spokesperson said the extra money was to let the retailer increase its stock ahead of the Christmas sales period. On Wednesday, Hilco said it had received no formal update on the status of the negotiations.
David Jones had also been negotiating with multiple landlords, not only Scentre, to cut its rent bill and close some loss-making stores. The source material does not detail how those other talks have gone. If administration goes ahead, the consequences would fall on the retailer's stores and the people who work in them, though no figures on jobs or closures have been given.
What to watch is Thursday morning's board decision, whether McGrathNichol is appointed, and whether the company can show it passes the solvency test to keep trading through the Christmas period.
Notable Quotes
We have made a generous offer to Anchorage Capital Partners that would have facilitated the continuation of David Jones trading. That offer has disappointingly been rejected by them.— Elliott Rusanow, Scentre Group chief executive
Hilco Capital has funded above the agreed facility to allow David Jones to increase stock holdings ahead of the busy Christmas trade and sales period.— Hilco spokesperson
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