Executives from David Jones and Westfield operator Scentre Group met on the 30th floor of Westfield Sydney in a final attempt to salvage the department store chain, but the talks ended without a deal after the retailer fell behind on about $5 million of rent.
David Jones’ board had been negotiating a major downsizing of its loss-making network of 38 stores, with a plan from chief executive Erica Berchtold to keep 12 sites, seek revised terms for 7, and exit 19. Part of the rescue architecture depended on landlords agreeing to rental holidays and releasing $74 million in bank guarantees that currently protect landlords if the tenant defaults.
Scentre Group holds roughly $30 million of those bank guarantees and had been a central counterparty in the talks. Negotiations became strained when David Jones missed rental payments, prompting Scentre to insist that outstanding rent be settled before it would proceed with broader concessions.
A person close to the negotiations said the late payments were the main obstacle. “The sticking point was: the company was behind in rent,” the person said. “Scentre wanted outstanding rent to be paid to continue with negotiations.”
David Jones’ directors produced a final proposal after the meeting offering to pay the arrears if landlords agreed to a rent holiday, release of guarantees and a timetable for store closures. That proposal did not prevent a further missed deadline on Sunday, November 1, and Scentre discovered David Jones had made payments to other landlords, which Scentre took as a rejection of its terms.
Scentre then told the market that David Jones had been paying substantially lower rent than other retailers, at $352 per square metre compared with an average of $942 per square metre across its portfolio, and that the retailer had not paid rent after September. Scentre’s chief executive Elliott Rusanow said publicly that the company had offered a package to Anchorage Capital Partners that would have allowed David Jones to continue trading, and that the offer was rejected.
“We have made a generous offer to Anchorage Capital Partners that would have facilitated the continuation of David Jones trading,” said Elliott Rusanow. “That offer has disappointingly been rejected by them.”
Late on the same day Scentre revised its position, David Jones’ board met with Anchorage Capital leadership. Within 24 hours administrators were appointed, with receivers and managers named by British lender Hilco. Administrators are now seeking a buyer to keep parts of the business operating.
The collapse follows years of restructuring attempts. David Jones was sold to Anchorage in December 2022 for a price described as lower than what its previous owner, Woolworths Holdings, had paid. Former chief executive Scott Fyfe had proposed a turnaround involving $250 million of investment in stores and digital upgrades, including $22 million on a refurbishment at Westfield Bondi Junction, but Anchorage declined further cash injections.
Fyfe, who left the business before the appointment of administrators, has launched legal proceedings alleging corporate oppression and is seeking either a buyout of his shareholding or access to the company’s financial records through the Supreme Court of Victoria. Meanwhile suppliers who were asked to extend payment terms by up to 120 days report they are owed tens or hundreds of thousands of dollars and face being unsecured creditors.
Shoppers have been rushing to redeem David Jones gift cards while stock levels have fallen, and the company’s immediate future now depends on whether a buyer can be found or landlords agree to significant concessions. Scentre Group and Anchorage Capital declined to comment further on the outcome of the discussions.
