The shares lost more than 21% – closing at just 5.27p – on reports that some of its suppliers have turned against the company. Twelve months ago the shares were changing hands at 40p and five years ago they were more than 100p.
Two London-based suppliers have cut ties with Debenhams while another has reduced the amount of business it does with the chain, according to fashion trade magazine Drapers.
Their decision was reportedly triggered by a decision made by credit insurers to reduce the protection they provide for suppliers to cover their costs in the event that Debenhams goes bust and is unable to pay them.
Reducing the amount of cover available to Debenhams suppliers indicates that the credit insurers, which have extensive experience of the retail market, believe the chain is at risk.
The move comes just weeks after credit ratings agency Moody’s downgraded its long-term outlook for Debenhams and increased its “probability of default” rating, which assesses how likely it is that the company will be unable to pay some or all of its debts.
“They owed us so much money at any one time, we decided it was too risky,” one supplier told Drapers.
“It’s not worth it. I know other suppliers are nervous about going forward with Debenhams, [and] we were in the same boat. It could be a disaster for them.”