David Jones faces possible voluntary administration after rent dispute with Scentre Group

David Jones, owned by private-equity firm Anchorage Capital Partners, is preparing to appoint voluntary administrators as early as Thursday following a failed rent negotiation with Scentre Group, which owns the Westfield shopping centres where the department store operates. The dispute centres on David Jones' failure to pay October rent, prompting Scentre Group chief executive Elliott Rusanow to state that the retailer is in breach of its lease.

Scentre Group rejected a restructuring proposal from David Jones and offered a counter-proposal that was also turned down by the retailer's board, according to a source involved in the talks. The board, including chief executive Erica Berchtold and directors Phillip Cave and Simon Woodhouse, is set to meet on Wednesday evening to decide whether to proceed with voluntary administration, which is expected to be handled by McGrathNichol.

"We have made a generous offer to Anchorage Capital Partners that would have facilitated the continuation of David Jones trading," Rusanow said in a statement. "That offer has disappointingly been rejected by them."

David Jones' initial restructuring plan involved handing over nine stores from February, retaining three stores at rents equal to 8 % of sales, keeping five stores on existing terms, and providing $45 million in bank guarantees in exchange for equity. A source noted that the retailer must meet a solvency test and resolve its finances.

Lender Hilco Capital, which recently provided additional funding to support inventory for the Christmas season, said it has not received a formal update on the negotiations. The lender confirmed it had extended financing beyond the agreed facility to help the retailer increase stock ahead of the busy holiday period. David Jones is also reportedly negotiating with other landlords to reduce its overall rent burden and close underperforming stores.