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Debenhams secures £200 million financing deal

Debenhams has announced that it has secured the support of its lenders in the form of a £200 million financing deal.

DEPARTMENT STORES

Debenhams secures £200 million financing deal

Debenhams has announced that it has secured the support of its lenders in the form of a £200 million financing deal.

The news means that the department store chain will now be able to begin its restructuring process that could result in the closure of a number of stores.

£101 million of the funding will be drawn down immediately while the remaining £99 million will become available if Debenhams’ major shareholder Sports Direct, or another shareholder holding 25% or more of the company, meets one of two conditions by 8 April.

These include either a making firm offer for the company, including refinancing the group debt, or Sports Direct cancelling its request to convene an emergency general meeting and then making a commitment to either provide funding or underwrite a rights issue by the company. 

If neither of these options are taken up, Debenhams said the second facility would only be made available when its lenders took over the business.

It added: “This outcome would ensure the stability and continuing trading of the group's operating subsidiaries, with no disruption to the group's business, customers, employees, pension holders, suppliers or operations. However, it would very likely result in no equity value for the company's current shareholders.”

Debenhams also said: “The board of Debenhams has also sought to do its utmost to preserve value and optionality for the company's shareholders. The board has received a number of proposals in recent weeks from Sports Direct that have purported to provide a solution to the group's financial challenges. In the board's judgement, none of these have provided or been compatible with a comprehensive solution.” 

The department store said plans for a restructuring of its store estate, if approved, would result in a significant reduction in its rent burden. 

Speaking of the refinancing, Terry Duddy, chairman of Debenhams, said: "We are pleased to have agreed this comprehensive funding package which secures the future of the Debenhams business and provides reassurance for Debenhams' employees, pension holders, suppliers, lenders and other stakeholders. We have also preserved a route for our shareholders to participate in the future of the business, but this requires the support of our major shareholder.

"We will now move to the next phase of the restructuring of the business, which includes reducing rents and reshaping our store portfolio, as we have referenced in previous announcements. These actions are necessary to ensure the strongest possible platform to support the business going forward.” 

 

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