Debenhams has disputed claims that it is facing a cash problem amid reports that its credit insurers have reduced cover for its suppliers.
According to a report by The Sunday Times, insurers Euler Hermes, Coface and Atradius have all reduced cover for new supplier contracts. Suppliers typically use credit insurance to protect themselves from not being paid. When insurance companies reduce or completely withdraw cover, it usually means they have concerns that a business will be unable to pay its debts.
The insurance means suppliers will be protected should a retailer go bust. This reduction means that Debenhams will have to pay many of its suppliers upfront, possibly putting a strain on its capital. Euler Hermes refused to comment on its position with Debenhams.
This year, Debenhams has issued three profit warnings and its last financial results reported an 84% drop in pre-tax profits. The company blamed its performance on the “poor conditions” of the high street.
A spokesperson said: “Debenhams has 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.”